Fed Says Modest Recovery is Broad-Reaching in U.S.
The U.S. Federal Reserve announced in its clean sweep report, known as the Beige Book, that “modest and fragile” recovery has now spread to the entire U.S. The survey, out on Wednesday, is the first of its kind to be undertaken since 2007. According to the Fed, signs of recovery, albeit humble, are all around, from strong sales of summer attire in New York, to more steel being produced in St. Louis and Chicago. This modest growth has still been unable to bring the unemployment rate down significantly.
According to Brian Bethune, HIS Global Insight economist, “It’s kind of like having more people sign up to run in the Boston Marathon but no one is running very fast. You have more people in the race, but they are all running slowly.” Ben Bernanke, Federal Reserve Chairman seems to agree, testifying Wednesday before Congress that the economy will experience limited growth in the coming months. Bernanke cited the debt crisis in Europe as a force that rattled the U.S. stock market for the past few months, but one that was not likely to bring about serious harm for recovery efforts, assuming that stability is brought back to Wall Street. On unemployment, Bernanke told Congress that it stands at only a small percentage under its twenty-five year high, at 9.7 percent.
The Beige Book is a region by region survey that provides a better economic look at the nation by taking information from the Central Bank’s twelve regions. By gathering info from experts on the markets and economists in each region, the result is a much more accurate and more intimate look at the economy overall – unlike broad, generalized statistics. It is notable that at the lowest point of the economic recession, each of the twelve regions reported a decline in economic activity – which is certainly not a shocker but is indicative of the wide-reaching recession.
The survey showed growth in manufacturing, retail sales, tourism, and housing. Housing, of course, was helped by tax credits for home buyers that have since expired. The Beige Book report also showed weakness in commercial real estate, and although shoppers were spending more liberally, their spending was not directed toward large, big-ticket items, but on necessities.
The Fed went on to back up other fresh signs that the job market is showing some gains, citing that the number of people that were laid off was less than the number of folks that quit their jobs voluntarily. This is welcome news following a fifteen month era in which layoffs outnumbered voluntary departures from employment. Some of these voluntary departures represented people who were leaving their current job for a new job, but others had no definite offers. This new confidence about getting a job is seen as welcome news for the recovering economy.
The last report of this kind showed improvements in the economy in eleven of twelve regions; only the St. Louis region failed to show improvement in the previous report. The new report, however, shows that increased metal production in St. Louis has allowed this heartland region to join the rest of the country in recuperating from the downfall.
Uncertainty was expressed about the fallout that the Gulf of Mexico oil spill and last month’s record flooding in Tennessee will have on improvements in the Fed’s Atlanta region, which encompasses most of the Southeast, although businesses in this region reported modest improvement as of now.
The survey will be very instrumental in the Fed’s deliberations later this month when it comes to interest rate changes. It is predicted that the interest rate will be left at its near record low in order to encouraged continued recovery.
Economists forecast that it may be the middle of the decade before the country recovers from the loss of more than eight million jobs due to the recession, and just as long to bring the unemployment rate down to its normal 5 1/2 to 6 percent.
