By Meena Thiruvengadam
of Dow Jones Newswire
WASHINGTON (Dow Jones)–Economic conditions continued to improve across much of the country in late October and early November, but a weak labor market and deteriorating commercial real-estate sector remain dark spots in the U.S. recovery.
In its latest beige book report, the Federal Reserve said conditions across many of its 12 districts have “improved modestly.”
Consumer spending has risen, home sales picked up and upward wage pressures were subdued, the Fed said.
In Atlanta, merchants were reporting better-than-expected sales. But in Boston, retailers picked up on an increasing frugality among customers, joining others around the country cutting back on inventory levels even as the holiday shopping season approaches.
In Kansas City, the retail sector provided yet more fodder for the argument that inflationary pressures remain subdued. “Consumer prices largely decreased as a result of the use of heavy discounting to bolster sales,” that district reported.
The report, prepared by the Federal Reserve Bank of New York, examined economic conditions across the country from late October through Nov. 20. It is among the information the Fed’s interest rate policy-setting committee will consider at its meeting later this month.
The report noted that in the post cash-for-clunkers era, used vehicle sales are outpacing sales of new vehicles.
The Fed’s researchers also observed “some pickup in home sales, though prices were generally said to be flat or declining modestly.” The report confirmed that in most of the U.S. the lower-priced segment of the housing market is outperforming the high end. In Atlanta, for example, new residential construction activity appeared concentrated in lower price points, it said.
The relatively optimistic tone of the report shifted when discussing the labor market and commercial real estate.
On commercial real estate, the report said that “market conditions were reported to have weakened in virtually all districts, with rising vacancy rates, downward pressure on rents, and little, if any, new development.”
Expectations for the sector in 2010 were low with Boston characterizing its own outlook for commercial real estate as “bleak” and Kansas City calling the sector “distressed.”
In many cases, the commercial real-estate sector is deteriorating, the Fed said. In Cleveland, for example, commercial and industrial construction activity was described as sluggish with financing remaining a major hurdle for builders.
On the labor market, the Fed observed scattered signs of improvement but said “further layoffs, sluggish hiring and high levels of unemployment” are still plaguing most of its districts.
The outlook for seasonal employees also wasn’t good, with the Fed’s contacts reporting lighter-than-normal hiring in advance of the holiday season. Dallas retailers said they have “increased hours of current employees rather than hiring new workers.”
-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-6629; firstname.lastname@example.org
(Jeff Bater contributed to this article.)
source: WSJ Online