Anecdotes, like those collected in the Federal Reserve’s Beige book, offer a pretty crude glimpse into what’s going on in the economy.
However, they’re far from scientific.
For example, the Beige book hasn’t been very helpful in revealing the true slack in the labour market, which economists have been monitoring for signs of wage pressure. If the labour market is tight, then wages should rise, and ultimately inflation should pick up in the economy.
“The Fed’s Beige book has been highlighting skill shortages since 2010, even as it confirms no broad-based wage pressure,” noted Bank of America Merrill Lynch’s Ethan Harris in December.
In other words, the Beige book has been sending a false signal regarding labour market tightness.
After reading the most recent Beige book, Gluskin Sheff’s David Rosenberg tallied the references to “labour shortages” in books going back to mid-2007, which was before the last recession began.
It’s hard to discern any real trend here. Maybe the Fed’s Beige book editors can explain. If anything, all we know is that there will always be an employer somewhere complaining about not being able to find good workers.
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