US economic activity has slowed in recent weeks and the labor market has continued to cool, the Federal Reserve announced Wednesday, as it continues its fight against stubborn inflation.
The Fed announced earlier this month that it was holding its key lending rate at a 22-year high as it looks to return inflation firmly to the long-term target of two percent without triggering a damaging recession.
Cutting inflation while avoiding a downturn, commonly known as a “soft landing,” is challenging, but the latest update from the US central bank suggests it could be on track.
“On balance, economic activity slowed since the previous report,” the Fed announced in its regular survey of US economic conditions, known as the “beige book”.
Four of the Fed’s 12 regional districts reported “modest” growth between early October and mid-November, while two reported flat conditions.
The remaining six noted “slight declines in activity,” the Fed said.
At the same time, “Demand for labor continued to ease,” the Fed announced, adding that most districts reported “flat to modest increases in overall employment.”
Retention appears to have improved in many districts, and some reported reductions in headcounts through layoffs or attrition.
Some employers even “felt comfortable letting go low performers,” the Fed announced.
While this would normally be concerning for the US central bank — which has a dual mandate to tackle both inflation and unemployment — it comes at a time when the US unemployment rate remains close to historic lows.
Policymakers at the Fed have indicated they expect that some softening in the labor market will be required in order to get US inflation to come down firmly to its two percent target.
