This report reeks of stagflation, defined as rising prices and recession simultaneously.
Please consider the Beige Book, a Summary of Commentary on Current Economic Conditions by the Fed.
Regional Overview
- 3 Growing: Chicago and Atlanta slightly, Richmond mildly.
- 3 Unchanged: Cleveland, St. Louis, Dallas
- 6 Declining: San Francisco, Minneapolis, and Boston slightly. Kansas City, New York, and Philadelphia modestly or moderately.
Overall Synopsis
Overall Economic Activity
Reports across the twelve Federal Reserve Districts indicate that economic activity has declined slightly since the previous report. Half of the Districts reported slight to moderate declines in activity, three Districts reported no change, and three Districts reported slight growth. All Districts reported elevated levels of economic and policy uncertainty, which have led to hesitancy and a cautious approach to business and household decisions. Manufacturing activity declined slightly. Consumer spending reports were mixed, with most Districts reporting slight declines or no change; however, some Districts reported increases in spending on items expected to be affected by tariffs. Residential real estate sales were little changed, and most District reports on new home construction indicate flat or slowing construction activity. Reports on bank loan demand and capital spending plans were mixed. Activity at ports was robust, while reports on transportation and warehouse activity in other areas were mixed. On balance, the outlook remains slightly pessimistic and uncertain, unchanged relative to the previous report. However, a few District reports indicate the outlook has deteriorated while a few others indicate the outlook has improved.
Labor Markets
Employment has been little changed since the previous report. Most Districts described employment as flat, three Districts reported slight-to-modest increases, and two Districts reported slight declines. Many Districts reported lower employee turnover rates and more applicants for open positions. Comments about uncertainty delaying hiring were widespread. All Districts described lower labor demand, citing declining hours worked and overtime, hiring pauses, and staff reduction plans. Some Districts reported layoffs in certain sectors, but these layoffs were not pervasive. Two Districts noted that, for many of their contacts, hiring plans had not changed since the start of the year. Wages continued to grow at a modest pace, although many Districts reported a general easing in wage pressures. A few Districts indicated that higher costs of living continued to put upward pressure on wages.
Prices
Prices have increased at a moderate pace since the previous report. There were widespread reports of contacts expecting costs and prices to rise at a faster rate going forward. A few Districts described these expected cost increases as strong, significant, or substantial. All District reports indicated that higher tariff rates were putting upward pressure on costs and prices. However, contacts’ responses to these higher costs varied, including increasing prices on affected items, increasing prices on all items, reducing profit margins, and adding temporary fees or surcharges. Contacts that plan to pass along tariff-related costs expect to do so within three months.
Ordinary Recession or Stagflation?
This report reeks of stagflation, defined as rising prices and recession simultaneously.
The ISM services report showed prices increasing for 96 straight months, now with declining orders. That’s stagflationary as well.
However, yield on the 10-year treasury declined 11 basis point to 4.35 percent and the yield on the 30-year long bond declined 10 basis point to 4.88 percent.
Those yield moves suggest more of an ordinary recession than stagflation. Much will depend on labor markets and retail sales.
Depending on what Trump does and how fast the markets react will determine the outcome.
Either way, it’s recession of one form or another, just as economists decided Trump pulled the economy back from the brink with tariff pauses.
Related Posts
May 31, 2025: Trump Will Double Steel and Aluminum Tariffs to 50 Percent
Tariff madness continues.
June 4, 2025: ISM Services Dips Into Contraction as New Orders and Backlogs Plunge
The Prices Index registered 68.7 percent in May, a 3.6-percentage point increase from April’s reading of 65.1 percent; the index has elevated 7.8 percentage points in the last two months to reach its highest level since November 2022 (69.4 percent).
June 4, 2025: Trump Demands Fed Rate Cut After Weakest ADP Payroll Report in 2 Years
ADP reported a slim 37,000 private payroll rise for May.
Inflation ” expectations”
1.) Lower interest rates
2.) End the Fed , return to Unites States Treasury issued Currency Notes backed by bi-metals. No interest cost with US currency notes , and congress will be constrained from borrowing and spending !
3.) The Pentagon has been funded by borrowing money, prior to Vietnam US Treasury issued WAR Bonds to fund military during war. A full audit like DOGE must be conducted.
1. Possible they will rise.
2. Not happening anytime soon.
3. A war bond is still borrowing.
3b. An audit is good. Also the fed. But also probably won’t happen.
Mish (or anyone),
What do all these terms mean?
1) grow slightly, grow mildly, increase slightly
Is increase slightly the same thing as grow slightly?
Which is the bigger term: slightly or mildly?
2) decrease slightly, decrease moderately, decrease modestly
Is decrease modestly the same thing as decrease moderately?
Which is the bigger term: slightly or moderately?
3) Is there a way to change these words (slightly, mildly, moderately) into something meaningful like percentage or total numbers AND what other words can be used (majorly, hugely?)
A lot of fancy wording without saying anything meaningful.
The Beige Book is a summary of survey comments from businesses. The language is vague on purpose but reflects tone. Also, I suspect, either bias or political imbalance, since the regions dominated by “blue states” are the ones “turning negative”.
Similar to the “inflation expectations” survey which shows a clear divergence of opinion between Dem and Rep partisans. Time will tell which is right, but so far the raging inflation feared by the Dems hasn’t materialized.
Fedspeak
Our country is about to become Trump’s 7th bankruptcy.
Old US is becoming irrelevant. Thinking of how Rumsfeld pissed off the European elite with Old Europe. Taxation and the welfare state do not a vibrant economy make.
The “Big, Beautiful Economy.”
They wanted to slow things down to tame inflation (pre-tariffs) so finally getting some effect. Quesion is how much more does the tariff nonsense add to declines?
Huntsville is still growing at warp speed with no end in sight. Defense expansion, FBI expansion and Space Command means all gas no brakes. Hammer down!
Lovely, all government spend to keep the state afloat. Tell me again about how you hate big government.
Who hates big government? What’s necessary is a properly allocated government. HSV is an absolutely necessary research and security hub.
Get rid of the welfare and healthcare hubris elsewhere. Get rid of California.
Import 5x as much food
Did you guys see this? “Chinese nationals charged with smuggling toxic fungus into Michigan” – classified as agro-terrorism. Smuggled last year in small plastic bags. I think eventually we’re going to war with China. https://www.youtube.com/watch?v=xSeA3Auk8LU
3 Growing – A good thing.
3 Unchanged – A good thing during the current uncertainty.
3 Declined Slightly – Not a bad thing during the current uncertainty.
3 Declined Modestly (NY & Philly to be Expected and Kansas?).
I see this as a “Good” Report” when you consider what you hear on the MSM and many News Outlets. Many think we fell off a cliff, but this looks like we are walking upright and strong with what’s been told is occurring. Now it can’t start heading in a huge negative direction of course, it this report leaves no reason to think such a thing IMO.
Totally agree with you. We are plodding along at the moment but not really sinking. The Fed will probably lower rates another time or two this year.
Also, I think the Ukraine/Russia conflict is about to reach something of a conclusion.
Oh, and many of the threatened tariffs will never actually happen, and yes, threatening them does get people to the negotiating table.
The biggest potential problem is this massive bill they’re trying to pass.
That spending Bill will do stimulus. This is all about midterms and Powell has 200 basis points of easing which for political reasons he will not do.
GOP is not going to create a economic political issue that Dems, Progressives and the rest of TDS sufferers would hammer GOP about.
ECB just cut again and it is my understanding mortgage rates in Euroland are at 3.3%. Now why is that with ECB projections of about 1.1% GDP growth rates and 6.2% unemployment ECB can take rates down but Powell is unable.
Bessent already reducing long term demand for treasuries and going short term for funding in effort to get long term rates down. That would directly rejuvenate Housing and create domestic demand.
The Bill will get passed and DOGE is not over, just taking a different form as politicos in GOP get out and explain to American people how wasteful Federal government has become. Selling DOGE to America will continue, there is a lot of fear generated by fake press aimed at DOGE cuts so that must get overcome to actually get spending trajectory reduced.
By the way current direction of economy is continued slowing of inflation with continued growth of GDP.
Armageddon is not happening at an economy near you.
I agree about the size and scope of the “Big Bill” as it is asking for way more than we need at the moment. I would have to assume it’s Politics as usual. I will agree to THAT, “IF “ you agree to THIS.
A much more slimmed down version, simply addressing what NEEDS to be addressed NOW! Leave the other BS for another time, and get the stuff done that has to get done.
I understand that Trump may be looking to appease others now, for future payback later (Politics). I think He should be ONLY looking to achieve what His Voters demanded of Him, and Why He got elected.
Small bites of this garbage infested crap that’s out there. Little by little, as they have started to do, eliminate the crap. If it’s taking too much Political Capital, then toss it aside and work on the many other items that need to be addressed. There will be time to address it all, but not all at once.
Trump does like to “Dive In” but in this case, maybe a more subtle and slower more directed approach would be better. Too many balls in the air, can cause you to drop some, and maybe very important ones. A sharper more laser focused approach on a set number of goals would be wiser IMO.
I rate Trump at a C+ leaning towards B if He can stay focused for long enough… If not He will drop to a C- quickly, as people will grow tired of Antics and not solutions… then who knows what might happen?
It’s the direction and rate of change
Negative and increasing
So disagree unless recession is a good thing
Most of these folks can’t do algebra… you simply can’t expect them to understand something like rate of change or inflection points. They’ll act like they understand, they’ll believe they understand, but every word out of their mouth tells you they have no idea what you’re talking about.
Welcome to the stupid dystopia of 2025.
Everything said here could’ve been said last year…
The recession we’re all anticipating (me included) simply hasn’t materialized in the data to date.
But, Payrolls tomorrow will be informative!
– It’s the direction and rate of change > Yes, but that is how Trump Negotiates. Not agreeing or disagreeing as to whether or not it’s the way to go, but it does appear to be Trumps.
– Negative and increasing > This is much more due to the MSM, Propaganda Outlets, and lack of “Positive Change” that is being accomplished. It has just recently started to become closer to being shared. I do agree however, that we need to See & Hear it ourselves!
– So disagree unless recession is a good thing. > You know very well, they of course can be a good thing, as long as the right things take place to prevent from happening again. This is what the current Administration is trying and working hard to do imo. Put things in place now, lineup things to be accomplished together, and have the fall out structure in place “When” the Recession does hit us.
>> I do get the vibe Mish, that a set up is in play (simple comment). Focused on smaller subsets, but highly important ones just the same. This used as fodder along with Mid-Terms, and any disaster that strikes, blown up 10X reality, if possible.
All the Negative talk on Tariffs, is based on very little, as we have never done this before. We need more positive discussion, perhaps explaining how to avoid these potential pitfalls, but still get the desired results they seek, as there Voter mandate.
Lots said to be going on, but with very little results, or much not talked about (some leaked) because things are happening behind the scenes, on both sides to be fair. Obviously not sure at all, but I still see, sense, hear and catch lots of positive discussion in my daily life, to maintain a very positive view.
A Recession could weed out, have fall out, and see others strengthen as a result. Take control away from lending parties, that are undermining what should be their objective. To help and assist, at a reasonable level, and expect proper return. School Loans are a perfect example of this imo.
I apologize for the delay…
Trump is killing the whole country. In the meantime I’m going for a leisurely walk.