Modest improvement in all but one of the Fed’s 12 banking districts suggests the economy is growing but barely enough to keep the unemployment rate from rising. And the debt crisis in Europe could slow such growth, especially if that region falls into a recession.
Jennifer Lee, a senior economist at BMO Capital Markets, said the Fed’s survey depicted an economy that “continued to muddle along, far from a robust pace.”
Hiring was weak in most areas. And businesses in six of the Fed regions said they had a hard time finding qualified workers for those jobs that were open, particularly for high-skilled manufacturing and tech positions.
Roughly 14 million people were unemployed in October. The government reports Friday on November unemployment and job growth.
The Fed survey, known as the Beige Book, covered the period from Oct. 8 through mid-November. The Fed’s last survey said most areas reported slight improvement in September and early October. But several regions said businesses had grown more cautious and were holding back on spending.
The economy grew at an annual rate of 2 percent over the summer after nearly stalling in the first six months of the year. Recent data suggest slightly better growth in the final three months of the year.
Retailers reported strong sales over the Thanksgiving weekend, consumer confidence surged in November to the highest level since July, and Americans’ pay rose in October by the most in seven months.
In the survey released Wednesday, the Fed said manufacturing was growing at a steady pace. Every district except St. Louis reported increases in orders, shipments or production, helped in many cases by stronger auto production.
Seven districts reported gains in retail sales. Some attributed the strength to colder weather giving a boost to clothing sales and many reported gains in auto sales.
Tourism growth was solid in many districts. Boston, New York, Richmond, Atlanta, Minneapolis and San Francisco all reported strength in hotel bookings. Boston attributed the tourism rebound to strength in overseas and business travel. After its November meeting, the Fed announced no new policy actions. It said it wanted to allow more time monitor previous steps taken. Many economists believe the central bank will leave policy unchanged again at the Dec. 13 meeting.
In September, the Fed voted to shuffle $400 billion of its investments to try to lower long-term interest rates. That has helped drive mortgage rates to historic lows.
After the August meeting, the Fed said it planned to the rate near zero until at least mid-2013, as long as economic growth remained weak. Fed officials hoped the clearer guidance would provide confidence to investors and borrowers that any rate increases were at least two years away.
The Fed has kept its key short-term interest rate at a record low near zero since December 2008. That is the rate that banks charge on overnight loans and serves as the benchmark for millions of business and consumer loans.