Beige Book Warning: Layoffs Emerging as US Economy Loses Momentum

The Fed Quietly Admits Mass Layoffs Have Begun, And The Economy Is Falling Apart (YouTube link)

Jeffrey P. Snider, host of the Eurodollar University channel, pointed out in the video above that recent data and reports from the Federal Reserve indicate a sharp economic slowdown in the U.S., with signs pointing to a potential recession.

The April 2025 Beige Book paints a picture of an economy stuck in neutral, with growing risks of a downturn. Stagnant activity, emerging layoff concerns, and pervasive uncertainty over trade policy dominate the narrative, while inflation takes a backseat. The labor market’s fragility and sharp declines in manufacturing and services activity suggest the economy is at a critical juncture, potentially transitioning toward recessionary conditions. Policymakers may need to shift focus from inflation to supporting growth, as the data signals significant challenges ahead. 

Key points include:

• Layoffs Emerging: The Fed's Beige Book notes "scattered reports" of layoffs, a deterioration from January when layoffs were "rare," particularly in consumer-facing and government-funded sectors.
• Economic Indicators Collapsing: Manufacturing and services PMIs across regions (e.g., Dallas Fed’s Texas Manufacturing Outlook at -35.8, Philadelphia PMI at -26.4) have crashed to levels not seen since 2020, reflecting a significant loss of momentum.
• Labor Market Weakness: The labor market is teetering on the edge, as shown by the Beveridge Curve, where declining job openings risk transitioning to rising unemployment and layoffs. Consumer confidence is also dropping, signaling labor market concerns.
• Inflation Less Prominent: Despite Fed rhetoric, inflation mentions in the Beige Book dropped to 8 in April 2025 from 14 in April 2024, suggesting businesses are more worried about economic downturns than price pressures.
• Fed Response: Some Fed officials are discussing rate cuts to support the economy, acknowledging the sharp loss of momentum.

The combination of plunging PMIs, rising layoff reports, and weakening labor market indicators suggests the economy may be entering a recession, with global parallels in places like South Korea.

References

1. Fed Beige Book April 2025
2. Texas Manufacturing Outlook Survey