–Employment Growth Pace ‘Tepid’

By Yali N’Diaye

WASHINGTON (MNI) – Overall economic activity, which had expanded at
a moderate pace from April to late May, “continued to expand at a modest
to moderate pace in June and early July,” the Federal Reserve’s latest
survey of conditions around the country said Wednesday.

The Fed’s so-called ‘Beige Book’ said that “Overall, Districts
reported that their contacts remained cautiously optimistic about future
business conditions.”

For now, three districts are reporting “modest growth” and five
districts moderate expansion, in a context of “modest” price inflation
and “minimal” wage pressure consistent with a “tepid pace” of employment
growth.

The Philadelphia, New York and Cleveland Federal Reserves, however,
said the pace of expansion in their districts was “slower” since the
previous report.

The Philadelphia district had already reported a slightly slower
pace of growth for early April to late May — when New York and
Cleveland had reported a moderate growth.

And at the time when both Fed Chairman Ben Bernanke and the Federal
Open Market Committee have made clear any additional monetary easing
will depend on the jobs outlook, the report noted slow progress on that
front.

“Employment levels grew at a tepid pace for most Districts since
the last report,” the Beige Book said.

The survey findings were summarized by the Atlanta Fed based on
information collected through July 9 and will be reviewed by the Fed’s
policymaking Federal Open Market Committee when it convenes July 31 and
August 1.

Reports across districts were “largely positive” for the housing
market, the Beige Book said, including higher sales and construction
levels and lower inventories of homes.

Meanwhile, rental markets strengthened further.

Commercial real estate activity, however, was “mixed.”

Reports on consumer spending reflected modest improvements,
although tourism was “strong” in several districts.

“Most Districts reported modest increases in retail spending on a
year-over-year basis, but many reported slower growth in recent months
compared with earlier in the year,” the report said.

It also noted “a few reports” mentioning a negative impact on sales
from high temperatures.

Still, among reports of increased retail sales, “most noted
strength in auto sales,” the Beige Book said. “In particular, auto
dealers noted that demand for fuel-efficient vehicles continued to
support sales.”

In the manufacturing sector, “activity continued to expand slowly
in most Districts,” the report said, noting that hiring varied by
district.

Elsewhere, the report noted a “generally stable” demand for
nonfinancial services.

In terms of loan demand, especially for loans related to real
estate, the report noted a modest increase.

** MNI Washington Bureau: 202-371-2121 **

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