Oct 21 (Reuters) - The U.S. economy continued to recover at
a slight to modest pace through early October as consumers
bought homes and increased spending, but the picture varied
greatly from sector to sector, the Federal Reserve said on
The Fed's Beige Book report was decidedly more upbeat than
the September version, with more districts using the words
"positive" and "optimistic" to describe various aspects of their
Still, the anecdotal report of business conditions across
Fed districts painted a picture of an uneven recovery from the
pandemic-induced downturn. On consumer spending for instance,
the Chicago Fed reported it had "increased robustly," the New
York Fed said it had "leveled off," and the Kansas City Fed
described it as having "declined modestly."
"Districts characterized the outlooks of contacts as
generally optimistic or positive, but with a considerable degree
of uncertainty," the Fed said in the report.
Manufacturing activity increased at a moderate pace and
consumer spending grew, but some districts said retail spending
was beginning to level off.
The Fed found that steady demand for homes boosted the
residential real estate market and lifted overall loan demand.
But the commercial real estate market, in contrast, continued to
deteriorate in many districts with the exception of warehouses
and industrial space.
Low inventory of homes and cars may have limited sales growth
in those markets to different degrees, some districts said.
Banking contacts in many districts also expressed concern that
delinquencies could rise, though they have so far remained
The Feds survey was conducted in its 12 districts from
September through Oct. 9.
SOME LABOR MARKET TIGHTNESS
The employment scene was mixed. Hiring continued at varied
paces across sectors and Fed districts, but the trend of
temporary layoffs becoming permanent persisted.
A COVID-19 survey by the Philadelphia Fed summed it up:
"Recalls of furloughed workers have slowed to 5% in September
from 13% in July. Meanwhile, the share of firms issuing
permanent layoffs edged up to 7% in September from 6% in July,
while the share issuing new furloughs edged down to 5% from 6%."
And despite high overall unemployment through the nation,
most districts reported "tight" labor markets. Firms, the report
showed, are responding in some cases by raising wages or
increasing flexibility for workers dealing with childcare
issues; others are increasing automation; and one firm in the
St. Louis Fed district reported "having to threaten furloughed
employees healthcare benefits to pressure enough to return to
After declining from late July to early September,
coronavirus infections are on the rise again in the United
States. Thirty-four out of 50 states have seen new cases
increase for at least two weeks in a row, up from 29 the prior
week, according to a Reuters analysis https://graphics.reuters.com/HEALTH-CORONAVIRUS/USA-TRENDS/dgkvlgkrkpb/index.html.
Cooling temperatures may usher more consumers indoors,
potentially leading to more cases. Restaurants in many districts
that benefited from outdoor seating over the summer months said
they worried colder weather could hurt sales.
House Speaker Nancy Pelosi, a Democrat, reiterated Wednesday
she was "optimistic" that Congress can hash out another aid
package to help struggling households and businesses before the
Nov. 3 election, but doubts linger whether Republicans will get
Fed policymakers pledged at their September meeting to keep
interest rates near zero until inflation is on track to stay
moderately above the central bank's 2% target for some time and
until the labor market is closer to full employment. Officials
are set to meet again shortly after the presidential election,
concluding their next gathering on Nov. 5.
Overall, the report pointed to the kind of uneven recovery
that Fed officials have warned may become a more-or-less
permanent state of affairs unless more federal pandemic relief
is brought to bear.
"While the strong bounceback in activity from the initial
devastation of COVID-19 was heartening, the recovery thus far
has been highly uneven, and the path ahead is highly uncertain,"
Fed Governor Lael Brainard said earlier Wednesday, adding
failure to deliver more fiscal aid is the biggest downside risk
to her outlook.
(Reporting by Jonnelle Marte; Editing by Andrea Ricci)