Steady hiring and rising costs challenge Federal Reserve's inflation fight

The Federal Reserve said employment remained steady in recent weeks even as inflation continued to rise across much of the country, according to its latest Beige Book, with higher energy prices linked to war in the Middle East cited as a major driver.

The report adds fresh evidence that the U.S. economy is still growing, but under pressure from persistent price increases. In a separate Bloomberg Economics report, U.S. service-sector activity picked up in May even as businesses faced the fastest growth in input costs in nearly four years, underscoring the same tension between resilient demand and rising inflation.

Together, the two reports suggest the Fed is still dealing with an economy that is not weakening enough to quickly ease price pressures. Stable employment can support consumer spending, but it can also make it harder for inflation to cool, especially if energy and other business costs keep climbing.

The Beige Book, which compiles anecdotal reports from the Fed’s 12 regional banks, is closely watched for signs of changes in hiring, wages, prices and demand. The latest reading indicates businesses are still finding workers and holding onto staff, even as they pass along higher costs in some sectors.

The services data point in the same direction. Bloomberg Economics reported that the price gauge in the services survey continued to surge, showing that companies in a large part of the U.S. economy are still experiencing intense cost pressure.

For policymakers, that combination matters because the Fed has been trying to slow inflation without sharply damaging the labor market. The latest signals suggest that balance remains difficult to achieve, with employment holding up while inflationary forces remain broad enough to keep officials cautious.