What is the Beige Book? It’s the story of the economy that you can’t always see in the numbers. Eight times a year, each Federal Reserve Bank publishes a Beige Book after gathering real-world economic insight from regional business leaders and experts.

Mary Burke is a principal economist and policy advisor with the New England Public Policy Center at the Boston Fed. She talks to Six Hundred Atlantic about what the Beige Book is and why it matters to the U.S. economy.

Visit bostonfed.org to learn more about the Beige Book. For more interviews and analysis of the economy in New England and nationwide, visit BostonFed.org/SixHundredAtlantic.aspx. Subscribe to our email list to stay updated on new episodes.

ALLISON ROSS:

The name might be bland, but the information in the Beige Book is anything but dull. The Beige Book is released by the Federal Reserve eight times per year, and it offers important insights into economic conditions around the country – including in New England. But how? It gives Fed officials a look at the economy through the eyes of people running a variety of sectors, from manufacturing to tourism. These perspectives inform policymakers regionally -- and nationally.

I’m Allison Ross, and this is Six Hundred Atlantic, a podcast produced by the Federal Reserve Bank of Boston. And today we’re taking a closer look what the Beige Book is and how it’s put together.

Mary Burke is a principal economist at the Boston Fed and a policy advisor with the New England Public Policy Center and she contributes to the Boston Fed’s Beige Book.

So, Mary, welcome back to the podcast.

MARY BURKE:

Thank you, Allison. Glad to be here.

ALLISON ROSS:

I want to backtrack a little and ask about the role and history of the Beige Book and the name itself. Why is it called the Beige Book? What are its origins? And how has it evolved over the years?

MARY BURKE:

So, the official name is the Summary of Commentary on Current Economic Conditions by Federal Reserve District. That is a bit of a mouthful, so then it was nicknamed the Beige Book just because of the color of its cover. What some people don’t know is that it actually used to be called the Red Book. Because it used to have a red cover. That was between 1970 and ‘83 and that was before it was a public document, it was just an internal document. But then when it was made public, for various reasons the color was switched to beige, possibly because it was a more neutral color. And the report has evolved over time, it used to be shorter, and it used to be a bit more including opinions say of directors of the Federal Reserve Banks around the district, even their opinions on economic policies and I don’t really see that in the current report. So, yeah it has changed over time.

ALLISON ROSS:

Now, you're one of the folks behind the scenes here in Boston representing the Fed's First District, which includes all six New England states, which is a pretty diverse region geographically, but also by industry. So what kinds of economic information are you collecting and from whom?

MARY BURKE:

All the businesses must be headquartered in the region, in the manufacturing sector, retail trade, tourism and hospitality, software and IT services, staffing services, and commercial and residential real estate. We ask them things like about recent changes in revenues for their businesses, demand, employment, such as hiring and firing activity, changes in wages, changes in their input costs, and in what they're charging for their goods and services. And more importantly, we ask them about the factors that are driving those changes. We ask them about the near-term outlook for their own firm and for the economy. Do they plan to raise prices? Are they optimistic and pessimistic? How are their consumers doing? So those kind of sentiment questions are really important.

ALLISON ROSS:

This is known as a qualitative report, but what does that exactly mean?

MARY BURKE:

So, it doesn't mean we don't ask them about things with number values. Like, we're asking about what happened to prices, how did your prices change? You know, did you hire people? Did your employment headcounts go up, et cetera. But we're not always asking them for precise numerical answers. It's not the same as when a government statistical agency is collecting data from large numbers of people and asking for precise numbers. So, it's like prices went up a little bit, or they went up a lot, or they went up by about an average amount this year, or wage growth was about average. So those kind of more, you know, fuzzy numbers. It’s qualitative in the sense that we're also asking them about why the changes that they see happening are occurring, and asking them for their opinions about where they see their business headed moving forward. So, it's a lot about the stories behind what's going on.

We care a lot about sentiment. You know, what's the mood out there among consumers? What's the mood among business owners? Are they feeling really cautious? We've heard a lot lately about uncertainty and how that's giving pause and it's harder for people to make decisions in an atmosphere of uncertainty, versus other times people say they're just feeling really bullish and really confident and they're just ready to grow. And so, I think picking up on how the mood changes over time is really a strength of the Beige Book.

ALLISON ROSS:

So it's the stories to help the numbers make sense in a way.

MARY BURKE:

Yes, that's a great way to put it.

ALLISON ROSS:

So why is this important to policymakers?

MARY BURKE:

Well, it's important precisely because of the limitations of what hard data can tell you, right? Hard data doesn't tell you how consumers are feeling and whether they're going to start to pull back on their spending. So maybe spending looked like it went up, but or maybe that was some temporary reason behind that, and now consumers suddenly their mood has shifted, and our contacts are going to pick up on that really quickly in a way that the numbers aren't going to do. And so, by picking up on the mood, it can tell us where the economy is headed. And that's really important for policymakers to understand because monetary policy works with a lag, and so they have to guess where the economy is going to be in six months and sentiment is one of the best indicators of that.

ALLISON ROSS:

What are some examples of economic trends identified by the Beige Book?

MARY BURKE:

One example that I think is really interesting from the Boston Fed is that our contacts in commercial real estate, before the pandemic, were cautioning about a potential glut of lab space in the Boston area. At the time, the vacancy rate in the laboratory space was really only around 4%, but there was a lot of construction going on, and perhaps they perceived that demand for that sector was plateauing. And then they also understand that it takes a while to build a space, and once it comes online, the economy could be in a very different place.

And lo and behold, now we're looking at a situation where some of these spaces, some of these buildings, have 30% vacancy rates. There's been a lot of pullback of venture capital from the sector and other issues, high interest rates. And so, it's not like they had a crystal ball and could actually foresee all of that, but they saw that as a real risk and a real possibility and based on their experience in the market, they were just picking up on those signs.

ALLISON ROSS:

And they saw that trend in that story before the numbers, you're saying?

MARY BURKE:

Oh, right, exactly. And they might've been wrong, but they were saying, "Look, there's a real risk here. If this keeps going and if there's some bad luck, we run into some bad luck in this sector, this could be a real problem." You know, so they saw it as a possibility.

ALLISON ROSS:

What are some of the practices that help the Fed maintain the Beige Book's credibility as this qualitative economic tool?

MARY BURKE:

I think the key is that we maintain strong relationships with our contacts by keeping the information confidential, providing accurate representations of the information that they transmit to us, and we're giving them a voice that is heard by policymakers. The report is produced by a team of people and the durability of the relationships that we have with our contacts, up to 20 years in some cases I think, really speaks to the contact’s confidence in the process.

ALLISON ROSS:

How do we continue to get good data?

MARY BURKE:

We want to continue to maintain the good longstanding relationships that we have with our existing contacts, but just broaden even further and dedicate even more resources to maintain the quality.

ALLISON ROSS:

That's great information. Very helpful. Mary, thank you so much, and thanks for joining us on the podcast.

MARY BURKE:

Thanks, Allison. It's a pleasure.

ALLISON ROSS:

You can find more information about the Beige Book in the show notes. Head to bostonfed.org to subscribe to our newsletters. There you can get the latest podcast episodes and research right in your inbox. I'm Allison Ross signing off for another episode of Six Hundred Atlantic. Thanks for listening.