Fed survey shows US growth, hiring improves

AP News
Posted: Apr 11, 2012 5:20 PM
Fed survey shows US growth, hiring improves

A Federal Reserve survey of business conditions across the United States suggests last month's pullback in hiring may be temporary.

The survey released Wednesday showed that each of the Fed's 12 bank districts grew steadily from mid-February through April 2. And hiring was stable or increased throughout most of the country, according to the survey.

The Labor Department last week said that job creation slowed in March to half the pace from the previous three months. But the Fed survey, which is anecdotal, didn't reflect the weakening.

"I didn't see any companies say that they're scaling back sharply on hiring because demand is slowing," said John Canally, an economist at LPL Financial.

The survey, known as the Beige Book, suggests that the hiring trend is somewhere between the roughly 250,000 jobs added per month over the winter and the 120,000 created in March, Canally said.

The Beige Book is released eight times a year and is based on surveys by the Fed's 12 regional banks. There are no numbers in the report. But its findings, which are released two weeks before the Fed's policy meeting, help influence the discussions.

When the Fed meets on April 24-25, members are expected to stick with their plan to hold short-term interest rates at record lows until at least late 2014. They will likely point to the slower hiring pace in March as evidence that the economy still needs support.

The Beige Book offered a brighter outlook for the coming months. Job gains occurred in manufacturing, shipping, information technology and professional business services, the survey noted.

Consumers are still spending. Retail sales increased in almost all districts, the report said. And four districts said the short-term outlook for retail spending is positive.

The housing market showed improvement in most areas. Developers built more apartments. And banks said demand for loans increased.

"The report was generally positive, with widespread optimism about manufacturing and an encouraging outlook for household spending," Dana Saporta, an economist at Credit Suisse, said in a note to clients.

But the survey cautioned that the economy and job market are far from recovered. Unseasonably warm weather boosted activity in several industries, including retail, auto sales and real estate, the survey noted. Saporta said that such growth could weaken once the impact of the weather fades.

Many economists have said that better winter weather prompted some companies to accelerate hiring in January and February, which may explain why some added fewer jobs in March.

Employers in three of the districts said they want to see more robust growth before they expand their work forces. And businesses in most areas expressed concerns about rising gas prices. Retailers in five districts worried that pricier gas would drag on consumer spending in coming months.

Fed Chairman Ben Bernanke has warned that the economy is growing too slowly to maintain recent declines in the unemployment rate.

The unemployment rate has fallen from 9.1 percent in August to 8.2 percent in March, although part of the drop was because people gave up looking for work. People who are out of work but not looking for jobs aren't counted among the unemployed.

Additional hiring has boosted consumer confidence and spurred more spending. Consumer spending jumped in February by the most in seven months. And many large retail chains have reported healthy sales for March.

Higher auto sales and rising business demand for machinery and other equipment is boosting factory output. The manufacturing sector expanded in March at a faster pace than the previous month, according to a private survey.

The economy grew at an annual rate of just 3 percent in the October-December quarter. Most economists are predicting growth slowed in the January-March quarter to an annual rate of less than 2.5 percent.

Bernanke has said growth normally needs to be closer to 4 percent for a full year to lower the unemployment rate by a full percentage point. He has warned that hiring is likely to slow until consumers and businesses spend more, fueling faster growth.

Wages aren't rising fast enough to keep up with inflation. Rising gas prices are also weighing on consumers' ability to spend money on other goods and services. And Europe's debt crisis has flared up again, as Spain and Italy have been forced in recent days to pay higher interest rates on their debts.