Fed Beige Book: US-Iran War Increases Uncertainty, Labor Market Enters "Hire and Fire" Mode.

The latest Beige Book released by the Federal Reserve shows that the US-Iran war has quickly become a major source of uncertainty for businesses, affecting key decisions such as hiring, pricing, and capital expenditure. The report points out that during March, businesses were generally concerned about the potential cost increases, demand changes, and macroeconomic impacts of the conflict. Many companies chose to adopt a "wait-and-see" strategy, delaying expansion plans. The Beige Book states, "The war has become a major uncertain factor, and businesses are more cautious in their decisions regarding hiring, pricing, and investment." Regionally, the impact of the conflict has already manifested in multiple industries. Businesses in the Northeast region reported to the New York Fed that energy costs have significantly increased, fuel surcharges have risen, and transportation and raw material prices have also gone up. Businesses in the Midwest reported to the Chicago Fed that there may be shortages in certain chemical supplies. The St. Louis Fed pointed out that the conflict has led to increased volatility in the agricultural sector, affecting agricultural equipment sales, while fertilizer costs have risen significantly. The Beige Book also reveals the structural challenges facing the current economy. Although overall layoffs are still limited, businesses' willingness to hire has significantly weakened. More positions are being filled due to turnover rather than an expansion of the workforce. This trend is consistent with recent data, indicating that the US labor market is entering a phase of "low hiring, low layoffs." A business representative told the Minneapolis Fed that their company had planned to hire more employees, but due to increased economic volatility, they have decided to postpone hiring. At the same time, there are signs of differentiation on the consumer side. Persistently high inflation has put pressure on residents' budgets, making consumers more sensitive to price increases. The report shows that there is an increasing demand for food banks and social service organizations nationwide. Retail businesses are also feeling the pressure. A jewelry store in Williamsburg, Virginia, told the Richmond Fed that consumers are more inclined to search online for lower prices. "If they can save a dollar and get free shipping, they will choose to shop online, making this year the worst year so far." Despite showing some resilience in the face of multiple risks, the Beige Book points out that the war is adding new uncertainty, which is dragging down business confidence and economic activity.