The U.S. economy is still growing at a solid pace, a Federal Reserve report said Wednesday, but labor shortages and supply-chain bottlenecks are restraining growth and triggering higher inflation.
The Fed’s Beige Book, a period evaluation of the economy, shed more light on the unprecedented challenges facing the U.S. as it recovers from the pandemic. What’s hurting the economy the most right now are a lack of workers and the inability of companies to obtain badly needed parts and supplies.
“Growth in the regional economy slowed to a modest pace in recent weeks, as supply disruptions and labor shortages have impeded economic activity,” the New York Federal Reserve said.
The latest Beige Book cited labor shortages 26 times compared to just six mentions in January.
And the report referred to supply-chain problems 37 times vs. just nine mentions in January and none before the pandemic started in March 2020.
“Fear and uncertainty of the delta variant continued to constrain growth, but contacts were most worried by ongoing labor shortages and supply chain disruptions,” the Philadelphia Federal Reserve said.
While the shortages have constrained economic growth, the report found the economy was still expanding at a steady pace, with most businesses “cautiously optimistic” that conditions will improve in the months ahead.
The latest Beige Book covers the period from September through early October.