FED’S BEIGE BOOK: THE RECOVERY REMAINS SLOW & SLUGGISH

The U.S. economy is recovering, but slowly, the Fed advised yesterday in its latest “beige book” report. That’s no great surprise and in fact we’d have fallen off our chair if the central bank said anything different. Indeed, we’ve been forecasting no less for some time on these pages, such as our view from last June, when we worried that “the past and current ills weighing on the economy will remain a heavy burden for many quarters and, to some extent, several years.”


The arrival of the so-called anecdotal news of regional economic trends in the various Fed districts offers one more reason to think that the post-recession period that awaits will be a long and painful struggle to repair the damage of the Great Recession. The old normal is nowhere in sight.
As an example, here are some choice quotes from the report:
* Most Districts reported that consumer spending in the recent 2009 holiday season was slightly greater than in 2008, but still far below 2007 levels.
* Toward the end of 2009, home sales increased in most Districts, especially for lower-priced homes. Home prices appeared to have changed little since the last Beige Book, and residential construction remained at low levels in most Districts. Commercial real estate was still weak in nearly all Districts with rising vacancy rates and falling rents. Since the last report, loan demand continued to decline or remained weak in most Districts, while credit quality continued to deteriorate.
* Labor market conditions remained soft in most Federal Reserve Districts, although New York reported a modest pickup in hiring and St. Louis reported that several service-sector firms in that District recently announced plans to hire new workers. In the Richmond District, temporary employment agencies gave mixed reports, but some noted increased demand for administrative and sales workers, laborers, and warehousing and distribution workers. Wage pressures remained subdued in most Federal Reserve Districts, and Atlanta noted continued wage freezes at some employers in that District. However, Boston reported some modest pay increases, and Minneapolis indicated that wages in that District have been level or rising moderately.

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