Economic conditions have been largely the same in the United States since early September, according to the Federal Reserve’s latest report.

The Beige Book—a summary of regional economic conditions across the 12 Federal Reserve districts—reported that much of the country had reached a standstill, with only two districts registering modest growth.

While inflation stabilized, input and selling prices rose slightly or modestly in most Fed districts. Regional economies reported growing “price sensitivity” among consumers.

Food prices for some items such as dairy and eggs “increased more sharply.”

“Contacts across several industries noted more acute pressures from rising insurance and healthcare costs,” the report stated. “Multiple districts reported that input prices generally rose faster than selling prices, compressing firms’ profit margins.”

Consumer spending was mixed as shoppers transitioned their purchases “toward less expensive alternatives.”

Employment remained solid as more than half of the Fed districts reported modest or slight growth. The rest witnessed little or no change in the labor market.

“Many districts reported low worker turnover, and layoffs reportedly remained limited,” the Beige Book noted. “Demand for workers eased somewhat, with hiring focused primarily on replacement rather than growth. Worker availability improved, as many contacts reported it had become easier to find the workers they need.”

Wages continued to rise, and workers in the skilled trades or remote communities reported larger-than-usual pay increases.

Meanwhile, the U.S. housing market held steady. Home valuations remained elevated, and rents were flat or declined. Inventories also improved over the last month.

“Still, uncertainty about the path of mortgage rates kept some buyers on the sidelines, and the lack of affordable housing remained a persistent problem in many communities,” the report noted.

Commercial real estate markets were unchanged.

In addition, the short-lived port strike that saw thousands of dockworkers walk off the job caused just “minor temporary disruptions.” Hurricane damage in the Southeast impacted crops and affected regional businesses and tourism.

In the end, contacts across the dozen districts maintained an optimistic long-term outlook.

Fed Chair Jerome Powell has previously stated that he finds tremendous value in the information gathered for the Beige Book.

‘Meaningful Uncertainties’

“To say the U.S. economy has been difficult to read is an understatement,” said Lawrence Gillum, the chief fixed-income strategist for LPL Financial. “From generationally high inflation and interest rates to concerns about the labor market, it’s no wonder consumers are unsure about the overall health of the economy.”

Headline data continue to portray an expanding economy, but underlying numbers present challenges in the broader economic landscape.

In the second quarter, the real GDP growth rate was 3 percent. Last year’s expansion was upgraded by the Bureau of Economic Analysis to 2.9 percent from 2.5 percent.

The Federal Reserve Bank of Atlanta’s GDPNow Model estimates a solid 3.4 percent expansion in the third quarter. Likewise, the New York Fed Staff Nowcast indicates a 3 percent growth rate from July to September.

On the labor front, the economy created 254,000 new jobs in September. Early estimates suggest the October data will show 180,000 new positions.

That said, real (inflation-adjusted) hourly and weekly median earnings are down 3 percent and 0.5 percent, respectively, since January 2021. A record 8.66 million Americans are working two or more jobs.

Households face a record $1.14 trillion credit card debt, and most Americans say they do not have emergency savings.

Dallas Fed president Lorie Logan believes there are “meaningful uncertainties” in the economic outlook, referencing “upside risks to inflation.”

“If the economy evolves as I currently expect, a strategy of gradually lowering the policy rate toward a more normal or neutral level can help manage the risks and achieve our goals,” Logan said in prepared remarks at the Securities Industry and Financial Markets Association annual meeting on Oct. 21.

“However, any number of shocks could influence what that path to normal will look like, how fast policy should move and where rates should settle. In my view, the FOMC [Federal Open Market Committee] will need to remain nimble and willing to adjust if appropriate.”

Minutes from the September policy meeting highlighted Fed officials divided about how aggressive policymakers must be to kick off the easing cycle.

Several meeting participants championed a smaller rate cut to “allow policymakers time to assess the degree of policy restrictiveness as the economy evolved” and “signal a more predictable path of policy normalization,” according to the meeting summary.

Fed governor Michelle Bowman, who has also cautioned on inflation risks, was the lone dissent vote.

Speaking at a Stanford University event earlier this month, Fed governor Christopher Waller expressed concern that a strong economy could rekindle inflation’s fame.

He made the comments after the annual inflation rate rose to 2.4 percent, higher than expected. Core inflation, which excludes volatile energy and food costs, also unexpectedly rose to 3.3 percent.

“Whether or not this month’s inflation reading is just noise or if it signals ongoing increases, is yet to be seen,” Waller said. “I will be watching the data carefully to see how persistent this recent uptick is.”

Boston Fed president Susan Collins is concerned that the broader economy could face threats of sticky inflation and a downturn.

“My confidence in the disinflation trajectory has increased—but so have the risks of the economy slowing beyond what is needed to restore price stability,” Collins told the Annual Regional and Community Banker’s Conference on Oct. 8.

The Atlanta Fed’s sticky Consumer Price Index (CPI)—a weighted gauge of items that change prices at a slower pace—rose 3.9 percent in September, up from 3.5 percent in August. On a year-over-year basis, it has been at or above 4 percent since January 2022.

Meanwhile, looking ahead, the Cleveland Fed’s Inflation Nowcasting model suggests the CPI might have moved up to 2.6 percent this month, and the core may have remained at 3.3 percent.

Despite the plethora of economic concerns, Wall Street’s recession calls have diminished.

Goldman Sachs Research recently reduced its recession probability in the next 12 months to 15 percent.