Fed survey: Recovery is spreading; jobs still weak
AP Economics Writer
WASHINGTON – The economic recovery is spreading to most parts of the country. Merchants are seeing better sales and factories are boosting production, but many companies are still wary of ramping up hiring, the Federal Reserve reported Wednesday.
The Fed’s new survey is consistent with chairman Ben Bernanke’s view that a modest recovery is unfolding, although it won’t be strong enough to quickly drive down unemployment now at 9.7 percent.
All of the Fed’s 12 regions – except for St. Louis – said “economic activity increased somewhat.” That was an improvement from the last Fed survey, released in early March, where nine regions reported modest economic advances. Snowstorms had crimped activity along the East Coast.
In the new survey, the St. Louis region said economic conditions had “softened.” That was a downgrade from the previous report when the region reported mixed economic conditions.
The Fed report, known as the Beige Book, will figure prominently when Bernanke and his colleagues meet on April 27-28 to decide the future course of interest rate policy. Economists predict the Fed will continue to hold rates at record lows to nurture the recovery. It has kept rates at super-low levels since December 2008.
The new survey suggested that consumers – whose spending accounts for 70 percent of national economic activity – are doing their part to keep the recovery going. Retailers in most parts of the country reported sales increases, and merchants were “cautiously optimistic regarding future sales,” the report said. Sales of home furnishings and electronic goods rose in a number of regions. So did sales of spring clothing. Car sales were up in many places, as well as tourism spending.
Factories saw improvements, too. Orders, shipments and production were up in all parts of the country – except for St. Louis. Many areas reported positive results in metals and fabrication. Makers of auto and auto parts also saw improvements. Production rose for electronic equipment, computers and high-tech goods.
Trouble spots for the economy remain. The housing market is still fragile and commercial real-estate activity stayed “very weak” in most parts of the country, the Fed said.
And, job prospects are still rather bleak for the nation’s 15 million unemployed. The Fed report noted that some hiring was evident, mostly for temporary workers. Overall, though, “labor markets remained weak,” the Fed report concluded. Employers added 162,000 jobs in March, the most in three years, helped by a burst of government hiring for census workers. Going forward, many private economists believe job creation will be feeble, meaning the unemployment rate is likely to stay high.
Given the weak jobs market and slow-moving recovery, inflation was under wraps. For instance, most companies hiring new workers in the Kansas City region were not offering higher salaries to attract qualified candidates. In the Dallas region, only a handful of companies were planning on partially reinstating employer matches to retirement plans or giving small pay increases.
The Fed survey is based on information collected from the Fed’s 12 regional banks on or before April 5. The report gives the Fed a way to keep its pulse on local economic conditions.