By Yali N’Diaye

WASHINGTON (MNI) – The labor market has shown some improvement from
November through December, albeit modest, amid “very limited” upward
pressure on wages, according to the Federal Reserve’s latest survey of
U.S. economic conditions released Wednesday.

In fact, the economy overall “continued to expand moderately” while
competition continues to prevent companies from significantly
passing-through the rising costs they are reporting, said the Fed’s
so-called ‘beige book’, based on what business and banking contacts told
the 12 Federal Reserve banks through January 3.

“Labor markets in most Districts appear to be firming somewhat, but
with virtually no upward pressure on wages,” the beige book reads.

That said, concerns remain about the recovery both in economic
activity and the labor market, which, according to business contacts,
explains the weakness of real estate activity in particular.

“Most Districts indicated that business contacts were positive
about the outlook,” the beige book noted. However, they remain
“cautious.”

In the real estate sector, a majority of Districts reported “local
housing markets as weak and sluggish with little change from the
previous reporting period.”

And according to “all Districts,” that weakness is due “to concerns
about the pace of economic recovery, especially in employment.”

Some also attributed the “slumping activity” in the housing sector
to difficulties in obtaining credit, although reports on credit activity
across Districts were “mixed” amid a general improvement in credit
quality.

This year is unlikely to bring the needed relief in the housing
sector, as “outlooks for residential real estate in the coming year were
mixed, with contacts in most Districts described as expecting continued
weak conditions.”

The commercial segment fared slightly better, as leasing markets
showed “increasing signs of recovery.” However, activity in
nonresidential construction was still weak, giving an overall “mixed”
picture.

Still, other sectors continued to expand, with conditions
“generally said to be better in Districts manufacturing, retail, and
nonfinancial services sectors than in financial services or real
estate.”

Manufacturing indeed continued to recover while retailers’ sales
“appeared” higher during the 2010 holiday season than the 2009 season,
if not better than expected.

In the auto sector, sales were steady or stronger in eight
Districts.

In nonfinancial services, where activity was generally steady to
higher, reports from the healthcare and transportation sectors were
“mixed.”

Still, “demand for staffing services remained on an upward trend”
in the healthcare sector.

In fact, “All District reports indicated that employment levels are
rising in at least some sectors, generally by modest amounts.”

Still, “overall wage pressures remained subdued,” the beige book
said.

Overall on the inflation front, while many Districts reported
businesses’ concerns that petroleum-related prices “will continue rising
in 2011,” the beige book said, “Most District reports mentioned
increasing prevalence of cost pressures but only modest pass-through
into final prices because of competitive pressures.”

** Market News International Washington Bureau: 202-371-2121 **

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