WASHINGTON (Reuters) – The U.S. economic recovery accelerated in recent weeks even as a long list of supply chain troubles, hiring difficulties, and rising prices cascaded through the country, Federal Reserve officials said in their latest review of economic conditions.
Growth was at a “somewhat faster rate” from early to late May the Fed reported in its Beige Book summary of anecdotal reports about the economy on Wednesday, with officials noting “the positive effects on the economy of increased vaccination rates and relaxed social distancing measures.”
But getting a $20 trillion economy back to speed posed challenges of its own, Fed officials reported based on contacts in their 12 regions.
Homebuilders could not keep up with demand, manufacturers faced delivery delays of the material needed to finish goods, and “it remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and skilled tradespeople.”
Prices were rising, and for now were likely to continue to do so, the Fed reported.
“Looking forward, contacts anticipate facing cost increases and charging higher prices in coming months,” the Fed said.
The Beige Book will help frame the Fed’s upcoming June meeting as officials edge towards a debate about how and when to begin pulling back on the $120 billion in monthly bond purchases and near-zero interest rates put in place to battle the economic fallout from the pandemic.
Fed officials say they will likely struggle for several months to get a clear read on an economy snapping back to life but hitting some speed bumps as it accelerates.
Hiring in April was much slower than expected, with a record number of job openings, but many going begging as workers weighed the risks of returning to work against practical constraints like a lack of child care and the continued availability of enhanced federal unemployment benefits. An upcoming report Friday on employment in May is also expected to fall short of the million or more hires Fed policymakers had thought would be created each month by this time.
Manufacturers have struggled to source some supplies, adding to cost pressures that the central bank expects will prove temporary.
Still, that has prompted concern about an inflation shock nonetheless, and it may not be until the fall before it is clear just what the post-pandemic economy looks like.
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