November 2023 Beige Book Interview – Little Rock

Matuschka Lindo Briggs: Thanks for joining us for our economic snapshot, where we discuss in eight minutes or less what's happening across the state as shared by businesses and industry contacts in the Little Rock Zone of the Eighth District. I'm Matuschka Lindo Briggs, the regional executive, with a guest, senior economist Chuck Gascon. Chuck, thanks for joining us today.

Chuck Gascon: Thanks for having me.

Lindo Briggs: Before we get started, I do want to remind our listeners that this podcast was a pilot. We wanted to find another platform to share the information we were gathering from Main Street participants in the real economy, which is really all of you listening.

Chuck is one of the St. Louis Fed’s regional economists who helps compile the qualitative summary of economic activity for our region’s Beige Book. Today, we are sharing with you information that we have gathered from Main Street and a taste of how the Beige Book is put together. 

When we use “we” in this podcast, please note that we are sharing our views, not those of the Federal Reserve Bank of St. Louis or the Federal Reserve System.

Chuck, can you share why it’s so important to gather this qualitative information from people in our District?

Gascon: Absolutely. You know, it all starts with a conversation. We need to learn from the various organizations and businesses around our district kind of how they operate and what information they may have that we find valuable. And that's done through these conversations where they learn about how we think about the economy, and we learn about their organizations.

And a lot of people just go through their day to day lives, not realizing some of the really useful information that they have that could be useful to us as economists thinking about the economy. And I'll give you just one example. You probably never thought about a manufacturer of bathroom tissue as being a leading indicator for return to office policies. But what we were finding and talking to one of these bathroom tissue manufacturers in our district was, that as companies were planning to return into their office, they were starting to see orders pick up, because the last thing you want to do is send a whole bunch of workers back into the office and then run out of toilet paper. So it’s just a great example of how you can put these two things together and get a lot of information.

Now, the last part I would add is that we really just need to then go back and be able to cross validate and verify that the information that we're getting is matching up with the data. The anecdotes that we're getting are oftentimes not random, and so they can be misleading. So, it's a matter of matching these two things together to really, to put together a nice narrative that combines both the data and the anecdotes.

Lindo Briggs: Thanks for threading that through with us. And I think especially that example really helps people see how the smallest bit of information, you may not know it, really supplies a lot of information and help for us with the data and everything that you work with.

So, let's compare notes on what we continue to hear on the pain points with current interest rates on mortgages, car loans, credit cards, really anything you want to reference. Let's just do a round robin, sort of, what you've heard throughout the year this year, Chuck.

Gascon: Yes. Overall, I think the narrative that we've heard throughout the year is an economy that continues to grow, but the rate of growth is slowing, and the tensions putting pressure on businesses continue to tighten, predominantly through higher interest rates, but also through price sensitivity of customers. So, businesses are now faced with some higher costs through higher interest rates, and they may not be able to pass those costs back on to their customers because those customers are being more price sensitive.

Overall, consumption remains pretty strong, but it's stronger probably than overall income growth. So, there are starting to be some signs of some pullback as we move into the fourth quarter in particular. Retailers are a bit more pessimistic than they normally would be around the holiday shopping season, and we're hearing the same thing in the warehouse and transportation space. Just a general slowing in the economy with respect to growth now, not a contraction, but just slower growth.

Lindo Briggs: Right. And really what I've heard the biggest pain point, or I guess the most that I have everyone talking about are mortgages and houses and mortgage loan volumes have declined. Not much changed throughout the state in regard to multifamily and residential housing, but still struggling with affordable housing. So that's really something that, no matter who I talk to, they're really looking at that housing market and especially the real estate market in northwest Arkansas in general. They're experiencing increased occupancy and significant investments from both local folks as well as out-of-state investors.

Gascon: Housing affordability remains a top concern among a lot of households and organizations that are supporting families across our Federal Reserve district. There are early signs that the supply is starting to pick up a little bit, but we still have a long way to go.

Lindo Briggs: All right. I just want to remind everyone that in this podcast, we are sharing the economic conditions reflected in the most recent Beige Book Report, which came out yesterday, November 29th. You can find it on the St. Louis Fed website, under Research.

We have a few more minutes here, Chuck. can you just give us a tiny peek into the sentiments of what you're hearing from contacts for 2024?

Gascon: Yeah, absolutely. I mean, labor continues to be a top concern. There seems to be some mismatches and struggling replacing some departing employees, and the labor market overall remains pretty tight. But there are some signs of easing. In talking to staffing contacts across our District, we are hearing signs that, you know, people are staying at their jobs a little bit longer. They're less prone to leave just after a year for a higher raise. And then we're also hearing on the wage side of things that firms have a better sense of what market rates are for workers, for the specific positions that they're looking for. So, a little bit less negotiation once a worker’s - a hire has been determined and kind of actually getting them in the door and everybody being happy with the labor compensation; overall benefits are more in line with expectations of what workers are looking for. So I think that's creating a healthier labor market than maybe we saw earlier on in the year and even in early on into last year when things were really tight and there was a lot of competition.

Lindo Briggs: Yeah.

Gascon: On the other side, I would just add, we're also seeing some improvements in labor supply. We're seeing a lot of opportunities for people that were historically out of the labor force finding ways to get back in. From disadvantaged minority populations to even disabled workers are finding opportunities for remote work, that even those participation rates are at higher levels.

Lindo Briggs: People are cautiously optimistic for 2024; they are still looking for qualified labor and they think that’s scarce. So they are holding on to the workers, so kind of like you saying, we're hearing the same, pretty much the same thing.

Chuck, I want to thank you so much for joining us for the great information and just the overall look of what you've been hearing. I want to thank the listeners for riding this new adventure with us again. It's helpful to hear what is happening on Main Street in our footprint.

For a full summary of what is happening in the Eighth Federal Reserve District, visit the St Louis Fed's website at stlouisfed.org. The next Beige Book release will be January 17th.

So, wishing everyone a safe holiday season and we so look forward to visiting your communities and hearing your stories in 2024.