"WE WORK TO BE SURE WE'RE TOUCHING ALL OF THEM": ADDING COLOR TO THE BEIGE BOOK

The following information was released by the Federal Reserve Bank of Atlanta:

Khara Persad: Hello! It's a sunny and very humid day in Jacksonville, Florida, and I get to spend it doing a little digging on the Beige Book. That's right, I said "beige"and you're probably thinking, that doesn't sound like my kind of book. But here's the thing: the information that's in this bland-sounding book is in fact quite consequential. It's put together by each district across the Federal Reserve System and influences decisions that are made about the country's economyspecifically monetary policy, and that kind of thing affects just about everyone. My name is Khara Persad. I work for the Atlanta Fed, also known as the Sixth District, and I want to uncover more about what the Beige Book is, how it's put together, and why it's important. Let's go.

I'm at the beautiful Jacksonville Branch, and sitting across from me in the cafeteria is the perfect person to help us understand what goes into building the Beige Book: Michelle Dennard. Hi, Michelle.

Michelle Dennard: Hiwelcome.

Persad: Thank you. OK, so I'm going to start with my toughest question. Can you explain what the Beige Book is, but in just one sentence?

The Atlanta Fed's Sarah Arteaga (left) and Michelle Dennard. Photos by David Fine

Dennard: In one sentence, although it may be a longer sentence: The Beige Book is a snapshot of how the US economy is doing right nowin real-world stories and summaries that are collected from businesses, financial institutions, workers, and community organizationsthat summarize how they're experiencing the economy.

Persad: Let's break that down, because it was a good sentence. I love that sentence, so let's break it down. It's a snapshot, and it sounds like your role is to go out into the community and meet with people. Can you talk a little bit about your role in how information is collected?

Dennard: Yes. So, what's used in the Beige Book is more qualitative in nature, and it's information that we get directly from business leaders and from community leaders about how they're being impacted by the economy today. We have a really rich and connected set of businesses that we hear from on a regular basis through the Atlanta Fed's Regional Economic Information Network[REIN]. It's part of our monetary policy process that prioritizes direct business intelligence that we use as input in our monetary policy deliberations.

Persad: OK, I have two questions off of that. The first one is, I want everyone listening to understand how it affects them; so, can you give mein the simplest terms, maybejust what monetary policy is?

Dennard: It's such an important question, and one that I get oftenand most recently, I got it from my 14-year-old son, who I brought into the office for an event. On the way home he asked, "Mom, what is the Fed, and what is it that you're trying to do? What does it actually mean for me, or for our family, and everyday life?" And it's such an important question, particularly for young people to know how the Fed impacts them, how it impacts their families; and while the Fed has a long-term strategic goalfocused on our dual mandate of maximum employment and stable prices)we're looking strategically at how to facilitate an economy that works for everyone...one where everyone can participate. And so, while things like open market operations or interest rates sometimes don't feel like they have a direct impact on a person or an individual or a family, it's how the Fed sets the tone for our nation's monetary policy. It has implications for how banks lend, what kind of environment is set for things like credit culture and interest rates. And while there may be indirect impacts on things like that, I think the Fed, as the guiding organization focused on our dual mandate, has very real implications for families every day.

Persad: How did he feel about that explanation?

Dennard: I think he got that there's a bigger picturethat there is a set of implications for businesses that we get to talk to, for community leaders, but I think he understood that it's important that the Fed maintain a strategic focusagain, driven by our dual mandate.

Persad: Let's go back to the other parts of the question I had. You talked about these relationships that you've established. Can you talk about how special that is?

Dennard: They're very special, and it certainly takes time to cultivate. Since the REIN program has been started by the Atlanta Fed, we have long-standing and really meaningful relationships with some of the most influential employers and community advocates in each of our communities. We get to know them. We know not only about how their businesses are impacted by the economy, but many times we know their families and their children. And it's that level of engagement and that kind of relationship building that we find most important, so that these businesses are willing to share with us sometimes information that can be sensitive or maybe more complicated, and it encourages openness and transparency with our business contacts.

Persad: Do you ever get feedback from a business contact that "I didn't know the Fed did this"?

Dennard: Oh, I get that a lot, and I think that's such a wonderful thingthat we get to be the face of the Fed in our communities, that we get to be present in our communities. I think it is a credit to the Sixth District that we care deeply about how businesses and individuals are moving in these communities. I think the best kind of feedback we get is when a contact or one of our branch directors wants to introduce us to another business who they think could engage with the Fed in a meaningful way.

Persad: Can you talk about the information that you find that the Sixth District contributes to the Beige Book? What does that indicate more broadly?

Dennard: I think we're in a very special place in the Southeast. And because of the outpaced growth that's happened here, if you were to extrapolate the economy of the Sixth District across the country, it's fairly representative of the nation's economy. It is such a diverse business community, and even from each branch location there are a wide range of businesses and sectors. We work to be sure we're touching all of them. We want to be sure we're hearing from big businesses, from small businesses, from organizations in different sectors, in each of those offices, to be sure that we're getting a fairly representative sample of our region's economy.

Persad: It sounds like you love what you do.

Dennard: I think we have the best job at the Fed. I really enjoy getting in and being in our communities, hearing from these business leaders, meeting new people, and having them share their experiences with us. Trusting us enough to have these confidential, sometimes sensitive conversations with us, I think, speaks to the credibility of the Fed in our communities.

Persad: Do you ever feel like you have to disarm, maybe, a business contact: "I know I'm Michelle from the Fed, but I'm not scary"?

Dennard: "We're from the Fed, and we're here to help." I think that speaks to our credibility, and I think it speaks to just how deeply the Atlanta Fed cares about what's happening in our communities. I think the best thing we can do is put a face with an organization that is sometimes viewed as impenetrable and making big decisions, but by having mea resident of the community, maybe I'm your neighborcome in and ask you some questions about how the economy is impacting you, I think that's a powerful tool.

Persad: Speaking of sources: you're about to be on your way to meet with a business contact, and I was wonderingis it OK if I tag along?

Dennard: Yes, that would be greatlet's go.

Persad: All rightlet's go. How far away are we driving?

Dennard: It'll probably take us about 20 minutes to get there. We're going to a different part of Jacksonville. We're in downtown right now, and this business is situated on the south side, kind of close to the St. Johns River.

Persad: How do you prepare for meetings like this? What goes through your mind? What do you read?

Dennard: This contact has been with us for several years, so in preparing I'll usually read the last few years of conversations. I'll also review what special events that the contact has been to. This one came to a round table earlier this year, so it'll be interesting to compare what we hear today to what he told us a little bit earlier in the year. I also make sure to do a quick review of news stories that may be relevant to their industry, a couple of Google searches just to see if there's any new information or changes in leadership. Are you ready to go?

Persad: I'm ready.

Dennard: All right.

Persad: Do we need GPS?

Dennard: I think we'll be just fine.

Persad: Okay, great. I've looked at previous publications, and I see there's no mention of who we talked to; there are no sources mentioned. Is that deliberate?

Dennard: It is deliberate. We don't typically share publicly who we meet with: any individual organization or any individual person. We don't share that externally because we're really careful about how we treat information that business contacts share with us. Some of it could be sensitive. It could be of value to their competitors if it were to get into the wrong hands, so we treat it with the utmost respect, the utmost confidentiality. We're very careful about protecting information. That also gives our contacts a level of comfort that they can be transparent with us, that they can share information with us and that we can be trusted.

Persad: What kind of questions do you ask?

Dennard: Well, I'll tell youevery conversation we have with a contact is a little bit different. We always try to cover some of the basic economic factors we're looking for: we're looking to understand what their demand conditions are like: Are they hiring? Are they giving wage increases? We're looking to understand what their investment strategies look like, what their pricing strategies are, what their overall economic outlook is, both in the short and the longer term. But they're different every time because the business contact may say something in a conversation that tips us off to a new or different direction, and so picking up some of those early signals or weak signals of something that may be impacting a business is particularly valuable to us.

Persad: Do you ever walk into a room thinking you're going to ask the questions, but then you get asked some questions?

Dennard: Oh, I love it when that happens! And it's actually great when I can sit down with a contactand this happens often with those contacts who have been with us for a long timewhere I can just say "hello" and they say, "Oh gosh, let me tell you what's been happening in our business." They're looking for a couple of things when they do thatthey kind of want to "ground truth" some of their experience and compare it to perhaps what we're hearing from contacts in similarly situated industries, or businesses they value. The return that we can give them is that we can do thatof course, in the aggregate. Again, we treat information very confidentially, and we're very careful about it, but sometimes sharing perspectives in the broader sense of what we're hearing from our contacts is helpful to the businesses that we talk to.

Persad: In addition to questions like that, do you ever get feedback, maybe from business leaders, about how they feel about previous policies?

Dennard: We do. Really, the most feedback we get is appreciation that the Fed spends time talking to businesses, talking to individuals, talking to business leaders about how the economy is impacting them. And it gives me a chance to say "thank you" for letting me be their voice, for taking their input, taking their experiences, and sharing it with our broader Fed team in Atlanta. I really appreciate the opportunity to be able to share their experiences on their behalf, because it's so valuable for our monetary policy deliberationsand it also serves as a reference point for our preparations for Beige Book.

Persad: Well, you answered my next question, because I was going to ask: Do you feel like the people you meet with understand and are happy to be sitting at the table with you to exchange information?

Dennard: By and large, yes. And it's a wonderful opportunity to engage with them, to hopefully share some value with them. The best possible feedback we get is when a business leader, at the end of a conversation, says, "You know what? I've got a colleague, I've got another person who we think could be really helpful to you, and would appreciate sharing their experiences with you as well." So, we are always looking for new businesses, for ways to expand our network and expand the opportunity that the Atlanta Fed has, to broaden our reach.

Persad: I love it. All rightare we here? Is this it?

Dennard: Yeslet me just get parked right here. All right.

Persad: And I obviously can't come.

Dennard: No, not today. Sorry.

Persad: All rightwell, we'll see you in a little bit.

Dennard: All right, thanks. Y'all sit tight.

Persad: Good luck.

Dennard: Thank you.

Persad: Since I'm not allowed in the room where it happens, here's a little more information about the team behind this work. Michelle is a part of the Atlanta Fed's Regional Economic Information Network, or REINwith an "e." It's the team responsible for doing exactly what Michelle is doing right nowclosely engaging with the local business community to really understand what's going on in the economy. Well, lookMichelle's back.

Dennard: Hi there.

Persad: Hi! Good meeting?

Dennard: Yes, it was very good.

Persad: And everything is top secret, and you can't tell me?

Dennard: Unfortunately, yes. But this particular contact had some really great insight into multiple sectors, so it was a very rich and engaging conversation.

Persad: I love it. So, that intel is going to go later today, I assume, to who I'm going to meet at a coffee shop, Sarah Arteaga. And my understanding is, she will look at your findings and help write the Sixth District's contribution to the Beige Book. Is that accurate?

Dennard: Yes. There are a couple of different ways that we'll use information like what I collected today. Some of it is relevant for our reference points for the Beige Bookyou're absolutely right. We also share this input among the other branch offices of the Atlanta Fed for purposes of our Regional Economic Information Network briefings for monetary policy. We compare these stories from business leaders from branch offices to put together a narrative view of how they're experiencing the economy, and we share that with the team of economists, and with Raphael[Bostic, Atlanta Fed president], to prepare for the Atlanta board meeting, and eventually for the FOMC [Federal Open Market Committee]. And you're right, it also does give us a jumping-off point for reaching out to contacts for Beige Book preparations as well.

Persad: Wonderful. Michelle, this has been very enlightening. I didn't know there was so much going on behind the scenes to put this report together, so thank you for explaining it to me.

Dennard: Thankscome along any time.

Persad: OK! Will you give me a ride back?

Dennard: Yes, let's go.

Persad: We've made it to the afternoon, and now I'm sitting across from Sarah Arteaga outside a busy coffee shop in downtown Jacksonville, catching a merciful breeze here and therethankfully. It's a perfect spot to talk about what comes next. It's businesses like this one that are providing grassroots information about how they're experiencing the economy, and my question, Sarah, is: When Michelle and others bring back their findings, what comes next?

Sarah Arteaga: That's a great question, Khara. So, after these meetings occurthese one-on-one meetings with various business leaders, community leadersthe regional executive will take a plethora of notes, and they will upload it into a database. It's housed there until we get ready to start working on the Beige Book and then preparing to brief Raphael Bostic for the Federal Open Market Committee meetings. All of that information is then distilled and analyzed to identify new trends, perhaps, in what businesses are seeing in the economy, or just to confirm that what we heard last cycle is the same as what we're hearing nowthose types of things. And so it all gets distilled and analyzed and filtered down into a story that we want to tell about the economy.

Persad: Michelle touched on this information being used to shape monetary policy. Who else reads the Beige Book?

Arteaga: Aside from what the Federal Reserve Bank president is reading in the Beige Book to help them with their decisions on monetary policy, the Beige Book is read by other economists, financial market analysts, as well as news outlets and other Fed watchersthose who really keep an eye on interest rates and monetary policy decisions.

Persad: So they're just waiting for this to dropthis is hot news?

Arteaga: Exactly that.

Persad: OKlet's talk about the data itself, and how these stories that you get from the business sector, how that complements the hard data that we have, the quantitative data. How do these mesh or come together, or supplement or complement each other?

Arteaga: They do complement each other in a way that you almost marry the data along with the anecdotal information. Data is backwards-looking, and so the information that we're gathering at the grassroots level is oftentimes forward-looking. So, they're making decisions based on past data or current economic conditions. Those two together, I think, really help with making decisions about where interest rates should go.

Persad: Sarah, can you walk us through the frequency of how often the Beige Book is put together, from research to writing it?

Arteaga: Sure. The Beige Book comes out every six weeks, about two weeks ahead of the FOMC meeting. In REIN, we live our lives by the FOMC cycle. After each FOMC meeting, we start the whole process over again: all new meetings, all new board meetings, all new Beige Book. There are eight cycles per year.

Persad: Do you ever feel pressure writing the Beige Book, writing your portion?

Arteaga: No, no pressure. I've been doing it since 2010, so it's a part of my life now.

Persad: When you look at all that data and all those stories a lot, is it overwhelming?

Arteaga: It can be, yesespecially when things are happening quickly, such as during COVID or during the Great Recession, where things were changing constantly in the economy. And so, sometimes it is a lot to distill and to think about, and actually identify what it is I need to talk about.

Persad: Do you remember ever going through data and finding a trend that was surprising, or that you had to double-check?

Arteaga: On occasion that happens. It might be something about labor markets, or it might be something about inflationbut yes, you listen to these stories and you're like, "Huh, I don't ever remember hearing this before. That might be something for us to watch in the future."

Persad: And you put that at the top?

Arteaga: Exactlykind of a weak signal, if you may.

Persad: Okay. Can you talk to me about when someone opens the Beige Book and they see breakouts for each district, there's a national summarywhat are they reading when they open it?

Arteaga: The opening summary paragraph is a recap of all of the Federal Reserve Districts' Beige Books. So, it's just a summaryat a high level, maybe a 30,000-foot levelof what the United States is experiencing. Each of the Reserve Banks has different methods for collecting this information as well. Some use strictly surveys to inform their Beige Book. Others use surveys and one-on-one phone calls or one-on-one meetings, those types of things. So each Reserve Bank has their own snapshot, and then that's what you see when you open up the Beige Bookjust that recap of the entire country's economy.

Persad: How long has the Sixth District been collecting information this way, with REIN?

Arteaga: That's a great question, too. In 2008, the Regional Economic Information Network was formed. We had representatives in each one of our offices. Our regional executives had a small team in each office. And it was a process that we had not really fully baked yet, but as time went on we were able to really make it a targeted program that works very, very well in getting real-time economic information.

Persad: Have you seen, over the years, our contacts build and build and build?

Arteaga: Yes, we have. I don't know the exact number of contacts that we have, but over any given period between FOMC meetings we might meet with upwards of 100 or more individuals, through just the one-on-one contacts. Our boards of directors are really our primary go-to contacts when it comes to gathering information, and then we have industry advisory councils that also provide us that industry-specific information.

Persad: Do you think all business contacts recognize the value of what they're contributing when they meet with us?

Arteaga: I think they do. They know that they're helping us to form an opinion, and it's also a give and take. When we talk with our business contacts, they will ask us, "What are you seeing, broadly, in the economy?" but also, "What is the Fed sayingwhat is President Bostic sayingabout the economy? What is his view on monetary policy at this time?" And so, we're able to share; it's a give and take, a push and pull, if you will.

Persad: I could tell from talking to Michelle she has passion for going out and meeting the community and engaging. How do you feel about what you get to do when all this comes back, and writing it and putting it together?

Arteaga: I think it's a fantastic way to learnI will say that. My favorite part of the job is just that I get to meet some wonderful people, but then I learn so much about things and industries that I never would have been exposed to. And I get to meet people that are great leaders, that can share really good information.

Persad: On that note, what do you want people to take away from this conversation?

Arteaga: I would say, learn a little bit more about the Federal Reserve: that we are interested in what people have to say, that we do feel their contributions are very valid and very valuable, and that the Fed does a lot of things a lot of people don't really know about.

Persad: Okay; I have a little trivia for you, Sarah. I read on the internetso you know it must be truethat when the Beige Book began being publicly published in 1983, the cover was the color beige, and that's how it got its name. Is that true?

Arteaga: That's actually true. Because the actual name of the report is the Summary of Commentary on Current Economic Conditions by Federal Reserve Districtwhich is a mouthful, so they've nicknamed it the Beige Book just because of its color.

Persad: If you could pick a different color to call the Beige Book, what color would you go with?

Arteaga: That's a really good question.

Persad: Hot pink.

Arteaga: Hot pink would be good. Rainbow.

Persad: Thank you, Sarah; this has been great. Thanks so much for explaining all of this to me.

Arteaga: Thank you. My pleasure.

Persad: I'm getting ready to head back to the Bank's headquarters in Atlanta, and what a day it's been. When I look around at the businesses up and down the street, I immediately think of not only the importance to the local economy, but to the nation's overall economy as well. So, the next time you hear about a Federal Open Market Committee meeting happening, consider the crucial insights across the Southeast that help shape decisions about monetary policy. And if you're a part of a business community and want to join in on these conversations, the Atlanta Fed would love to hear from you. Thanks for riding along with me for this episode of Economy Matters. I'm Khara Persadsee you next time.