Minneapolis Fed casts broader net to gauge state of U.S. economy

The Minneapolis Federal Reserve Bank’s section of a key U.S. central bank report on Wednesday for the first time flagged insights on the state of the U.S. economy from the perspectives of workers and of minority- and women-owned businesses.

The idea of casting a wider net to take stock of economic conditions is part of an effort at the Fed to better track the economy as it tries to steer the nation towards price stability and full employment, a goal it redefined last year as “broad-based and inclusive.”

And though it began more than a year ago, Minneapolis Fed regional outreach director Joe Mahon explained, “this initiative really came to the fore because of the experience of the pandemic and the fact it was having a much different impact on workers in different sectors, and on, in particular, lower-income workers.”

The Fed publishes the Beige Book eight times a year, releasing it a couple weeks before its regular policy-setting meetings. It is a compendium of data and anecdotes gathered by each of the 12 regional Federal Reserve banks on current economic conditions, based on surveys of and interviews with key business contacts.

In Wednesday’s Beige Book, the Minneapolis Fed added two new subsections – titled “Worker Experience” and “Minority- and Women-Owned Business Enterprises” – to the usual sections it and other banks typically include on employment and wages, inflation, and economic activity across key sectors like manufacturing, services and farming.

Businesses said job postings were picking up and there were not enough workers, especially for lower-paying jobs, the report showed.

Talking to workers, Mahon said, the Minneapolis Fed heard a lot about what keeps people from going back to work, including family care responsibilities, remote learning or fear of infection. The report also highlighted the challenges many workers in the district face on the job or in their hunt for employment, including a rise in employers demanding 12-hour shifts and transportation hurdles for low-income workers.

The added color is important, Mahon said: “If you are only talking to businesses then you are only getting one side of the story.”

Last October Minneapolis Fed President Neel Kashkari had flagged the coming change, noting that businesses are overrepresented in the Beige Book data and promising to fix that, at least in his section of the report.

The bank’s new section on minority- and women-owned businesses highlighted that many business contacts in that category “noted hesitancy among immigrant business owners to apply for assistance out of concern for jeopardizing the immigration status of themselves or family members.”

Mahon said he didn’t know if other Fed banks are planning to follow suit with their own Beige Book changes, but said he thought they were “broadly supportive” of the work.

“As a system we are committed to making sure that economic growth is inclusive and that we are understanding how broadly shared our economic growth or the path of the economy is,” he said.