Fed survey sees positive signs in most regions

Despite gains, broad growth is still lacking, central bank finds.

By Scott Lanman
BLOOMBERG NEWS
Thursday, September 10, 2009

NEW YORK - The Federal Reserve on Wednesday said 11 of its 12 regional banks reported signs of stable or improving economic conditions in July and August, adding anecdotal evidence that the worst U.S. recession in seven decades is over and that the economy has begun to grow again.

Five districts saw signs of improvement, the Fed said in its Beige Book business survey. The snapshot of economic conditions, published two weeks before Fed officials meet to set monetary policy, includes data through Aug. 31.

Activity was described as "stable or showing signs of stabilization" in a half-dozen other areas, including the Dallas region, which reported that its economic activity had "firmed." The exception was the St. Louis district, which said the contraction's pace "appeared to be moderating."

The central bank survey indicates that though the worst of the downturn might be past, the economy has yet to show broader growth.

Analysts estimate the economy to be growing in the current July-September quarter at an annual rate of between 3 and 4 percent. Most of that growth is thought to be coming from businesses that had slashed their spending during the recession.

Businesses in most Fed regions said they were "cautiously positive" about the economic outlook. That assessment was brighter than reported by the Fed in July, when most regions said the intensity of the recession was diminishing.

On the jobs front, employment conditions remained weak in all Fed regions.

A separate report Wednesday buttressed the Fed survey, as the U.S. Department of Labor found that job openings nationwide fell to the lowest level in nine years in July. Businesses and government advertised 2.4 million open positions on the last day in July, down from 2.5 million in June.

However, the Fed's survey found that staffing firms in Dallas and seven other regions reported a slight pickup in demand for temporary workers. That's an encouraging sign because employers will usually increase their use of temp workers before they hire new employees.

With the labor market weak, employers are expected to keep wages low, a force that should keep inflation in check, as the Fed report said, but also works against a recovery, given the dominant role of consumer spending in the U.S. economy.

One significant exception to the Beige Book's reports of stabilization was the commercial real estate market, in which demand for space remained weak, and construction, already at low levels, kept declining in all districts.

In contrast, the residential housing market remained weak but showed signs of improvement, including increased sales in some areas, the Fed reported.

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