U.S. seaports hummed, ski resorts bustled and stores rang up decent holiday sales as the nation’s economic recovery gained momentum at the end of the year, the Federal Reserve reported yesterday, though pockets of weakness persisted in some regions and industries.
The still-tough job market appeared to pick up in some areas, according to the summary of recent regional economic conditions compiled by the Fed’s 12 regional banks.
“The nation’s economy has continued to improve since the last survey” in late November, according to the report, which is compiled from surveys of companies in each of the 12 districts.
“Many districts reported modest improvement in labor markets,” the report says. “These improvements took the form of reduced layoffs or modestly increased hiring, although new hiring was still quite minimal in several districts.”
The Fed report matched the overall picture drawn by government data gathered during the same period, which showed increased industrial production, rising exports, still-booming home construction and sales, and a good holiday season for retail sales # but little net job creation. The report includes details from a range of companies and industries across the country to provide Fed officials in Washington a feel for what’s happening in the heartland as they prepare for their next policymaking meeting Jan. 27-28.
Even with the report in hand, the Fed is likely to leave its key short-term interest rate target unchanged at 1 percent, analysts said. In a series of recent speeches, several Fed officials have stressed that they feel justified holding the target so low, even as economic activity picks up, because of the persistence of low inflation, slack in the labor market and excess capacity in many industries.
“The tone of [the survey] is certainly encouraging from an economic point of view, and from an inflation point of view, there’s no sighting of inflation or inflationary [pressures] on prices or in wages,” said Stuart Hoffman, chief economist of PNC Financial Services Group. “There’s nothing in the [report] that changes the market’s perception of where the economy is headed or what the Fed is likely to do.”
Inflation at the producer level remained tame last month, the Labor Department reported yesterday. Prices paid to U.S. producers of finished goods rose 0.3 percent in December, in part because of a rise in food and energy prices. Excluding those volatile categories, the so-called core producer price index fell 0.1 percent.
The strongest report in the Fed survey came from the San Francisco Fed district, which said “the economy expanded soundly in November and December.” The Richmond district, which includes the Washington area, and most of the other districts said “their economies improved, strengthened further, or grew at a moderate pace.”
However, the Cleveland, Chicago and Dallas districts reported “only slow or modest growth,” the survey found.
The least upbeat report came from the St. Louis district, which described economic conditions as mixed, with some manufacturers and service companies hiring and investing while others are laying off workers, closing plants and holding investment flat.
A hospital in the St. Louis district said it planned to add acute-care beds and hire new workers, while a major airline said it would close its call center and cut jobs.
One common theme nationally was the pickup in manufacturing, reflected in rising orders, truck and rail shipments and expansion plans.
A milling plant in North Dakota announced expansion plans, an adhesive-label company in Montana is building a factory, and an exporter of manufactured equipment reported “an increase in projects in the Middle East following the capture of Saddam Hussein.”
In some cases, the improvement came in the form of less bad news: The Kansas City district said “layoffs subsided considerably” while the Dallas Fed said a law firm noted a slowdown in bankruptcy work.
In some cases, the news was good but still disappointing: “A major Minneapolis-based retailer reported that same-store sales during the first four weeks of December were up from last year but were running below its plan for a 4 percent to 6 percent increase.”
And while labor markets remained “slack” overall, several districts reported strong demand for employees in areas such as health care, temporary work and construction.