The Federal Reserve Bank of Richmond has provided an update on its economic outlook amid ongoing limitations in the availability of government data. Speaking at Shenandoah University in Winchester, Virginia, a representative from the bank discussed how recent disruptions have affected access to official statistics for nearly seven weeks.
“These are my thoughts only and not those of anyone else on the Federal Open Market Committee or in the Federal Reserve System. I hope you will give me some grace as we have been operating with limited government data for almost seven weeks,” the speaker said.
The bank described the challenge as “trying to bring a boat to shore in the pitch black and having the lighthouse go dark.” Despite these difficulties, it is relying on private sector data and direct outreach to businesses and communities within its Fifth District.
“The good news is that we aren’t navigating blind. We have other ways to keep a pulse on the economy. Private sector data help. For the most part, they aren’t as definitive nor as calibrated, but they can highlight big shifts in economic conditions. In addition, the Fed benefits from collecting real-time information directly from the communities we serve,” said the bank’s representative.
Each year, outreach teams connect with thousands of business and community leaders—this year targeting about 4,000 meetings—as well as conducting regional surveys and The CFO Survey to gather additional insights beyond official data sources.
“This outreach helps us understand the economy better, as well as anticipate turning points we might otherwise miss,” noted the speaker. Examples cited included early signals about pent-up demand during pandemic-related shutdowns and shifts in consumer pricing behavior post-pandemic.
Recent available government figures showed consumer spending increased by 2.7 percent year-over-year through August, with retail sales up 0.6 percent from July. Business investment remains strong due to advances like artificial intelligence, while credit card spending continues at healthy levels amid low unemployment rates.
However, experiences vary significantly by sector and region: “If you build data centers, or provide energy, or sell to higher-income customers…your economy is hot. But if you’re a farmer, or a realtor…you are struggling.” The impact of a potential government shutdown was also highlighted for federal workers and related businesses around Washington D.C.
Labor market conditions appear mixed; although unemployment was low at 4.3 percent through August, job growth has slowed considerably with an average increase of just 29,000 jobs over three months. Recent layoffs by large firms such as Amazon and Target were mentioned as signs of caution among employers.
“I will note it is a challenge to calibrate how much impact slower job growth will have on the unemployment rate,” said the speaker. The Bureau of Labor Statistics projects labor force growth at only 0.3 percent annually over the next decade—a significant slowdown compared to previous years—due to factors like population aging and lower immigration rates.
Inflation remains above target levels: “The last CPI print shows 12-month headline and core inflation at 3 percent through September.” While shelter price increases are easing and oil prices remain stable, other areas such as non-housing services continue to see upward pressure on costs.
Feedback from business contacts suggests that inflation expectations are still elevated compared to pre-pandemic times but that consumers are increasingly resistant to further price hikes—opting for less expensive alternatives or delaying purchases when possible.
“Increased productivity may also be giving businesses the ability to offset input cost increases,” according to feedback gathered during outreach efforts. Investments in technology and changes in staffing models since the pandemic may now be yielding efficiency gains across several sectors.
Overall, both inflationary pressures and weaker job growth present challenges for policymakers: “We are seeing pressure on both sides of our mandate…But we also see mitigants on both sides.”
The bank concluded by emphasizing continued engagement with local businesses: “In times like this, I look for guidance from you…Your perspective is important, now more than ever.”
