The 'Ask Your Uncle' Approach To Economics
The Beige Book is weird. It's an economic report released by the Federal Reserve every few months, but it doesn't have many numbers in it. Mostly, it's a bunch of stories gathered by talking to businesses around the country. A Fed economist once described it as the "Ask Your Uncle" approach to figuring out what's going on in the economy.
In the Beige Book released today, for example, we learned that:
- Sales of pet supplies are "a bit soft" in the Western U.S.
- Sporting goods sales are strong in New England.
- Boat manufacturers and medical equipment firms in the St. Louis region are planning layoffs, but bakeries and firearms manufacturers are hiring.
Also, as in the real world, everybody always talks about the weather in the Beige Book — especially when it rains. In today's Beige Book:
- Retailers told the Philly Fed that "excessive rain in June kept ... people away from stores, while some showed up just to 'hang out' at the mall."
- A "large department store chain" told the Richmond Fed that "cold and damp weather, along with the payroll tax change, had constrained sales."
- A "contact in South Carolina noted that heavy rains had damaged the regional wheat crop to the extent that sprouts were unacceptable for export."
The Beige Book does try to pull all this stuff together. At the top of the report, there's a bit of synthesis of how different sectors are doing. ("Manufacturing expanded in most Districts since the previous report, with many Districts reporting increases in new orders, shipments, or production.")
Still, much of the value in the Beige Book lies in all the weird, anecdotal details. Richard Fisher, president of the Dallas Fed, told us that beer sales at convenience stores, combined with reports from beer distributors, were one early sign of a slowdown in the homebuilding market before the crash.
In other words, collecting anecdotes — asking your uncle — really can be useful. "My uncles and aunts were very helpful in helping me learn some basic lessons in life," Fisher said.
MELISSA BLOCK, HOST:
Just hours ago, members of our Planet Money team yelled out, it's here, it's here. They were excited about the release of a certain economic report. It has a really boring title: the Beige Book. But Zoe Chace and Robert Smith want to convince us that it's way more interesting than its name might suggest.
ROBERT SMITH, BYLINE: The Beige Book is the weirdest economic report of them all.
RICHARD FISHER: It's called the Beige Book because it used to be covered with the gorgeous color of beige, but now it's electronic.
ZOE CHACE, BYLINE: Richard Fisher from the Dallas Federal Reserve. He is still psyched when he gets his copy because this is a report with no numbers, just little stories from businesses around the country.
SMITH: Yeah, it reads like a letter sent home from camp. This part of the economy is awesome. This part is so lame.
CHACE: From today's report, we see that sporting goods are flying off the shelves in Boston.
SMITH: Mm-hmm. Boat manufacturers in St. Louis struggling.
CHACE: In Virginia, higher mortgage rates led one banker to say refinancing has died.
SMITH: So how do we get these stories? Teams of economists at the Federal Reserve offices around the country literally pick up the phone and call, say, the lumber guy and ask how is business this month at the lumber store?
CHACE: How is business this month at the lumber store?
EDWARD SCHAEFFLER: This month has been pretty good, I'd say. What do you think, Pete?
PETER HEID: Started off to be a good month, yes.
CHACE: It's that easy. Just talk to Eddie Schaeffler at Dykes Lumber in Manhattan.
SMITH: And Pete.
CHACE: The Fed is the most powerful force in the economy. They set interest rates. They make the money. So why is the Fed listening to people like Eddie?
SMITH: Richard Fisher says these little anecdotes give you advance warning. For instance, they knew that something was fishy with the housing market a few years ago when they heard from beer stores that they were selling fewer six-packs.
FISHER: Because the people that work in construction consume beer, and they also consume it in certain patterns.
CHACE: You heard that beer consumption was down from some convenience store owners, and so you could infer that a housing downturn was going to take place in the economy.
FISHER: You could infer that there were changes taking place, and it wasn't just convenience stores, but also the distributors, Budweiser and other beer distributors.
CHACE: The problem with the Beige Book is that it gives you a snapshot, but it doesn't tell you what to do with that information. The beer was an important sign, but seeing it didn't change what happened.
SMITH: OK. So, everyone, pay close attention to the signs in today's report. Zoe?
CHACE: Employment agencies in the New York region say this is the best year for college grads since 2008.
SMITH: Yeah. They should go into sales. In Philadelphia, auto dealers said that business was on fire in June, best in six years.
CHACE: A firearms manufacturer in the St. Louis region is hiring, and so is a bakery.
SMITH: Yeah. And everyone in the report, when you read it, complains about the weather. It's too wet. It's too dry. In Philadelphia, they say the rain drove people to hang out at the mall but not into the stores.
CHACE: Pet stores in San Francisco are hurting.
SMITH: It's hard to know what it all adds up to. One Fed economist once described the Beige Book as the Ask Your Uncle method of gathering information.
CHACE: But Richard Fisher from the Dallas Fed says, hey, my uncle had lots of good advice. And the Beige Book does too. But as exciting as it is inside, there are no plans to change the name.
FISHER: You have to remember central banking is not supposed to be exciting. And I think beige is sort of the color that I would identify as the central bank's, the Federal Reserve's color. We want to be beige. We want to be bland.
SMITH: We consider it more of a racy novel covered in a brown paper bag.
CHACE: I'm Zoe Chace.
SMITH: Robert Smith, NPR News. Transcript provided by NPR, Copyright NPR.