Economic activity in the United States has grown only moderately in recent weeks, and a growing number of Federal Reserve districts have seen employment decline as a surge in coronavirus cases has led to more closures companies, the US central bank said on Wednesday.
In the Federal Reserve’s (commonly known as the Fed) latest Beige Book report, a collection of anecdotes from companies across the country, Fed officials revealed how the pandemic’s footprint varied by region and by region. sector, the rise in infections having dampened the optimism promised by the arrival of vaccines against the coronavirus.
Indeed, the vaccine launch has been a frequently cited source of optimism in many of the Fed’s 12 regional districts, with 10 mentions in the report, twice the number in the previous beige book published in early December.
“While the prospect of COVID-19 vaccines has bolstered business optimism for 2021 growth, this has been tempered by concern over the recent resurgence of the virus and its implications for near-term business conditions,” he said. the Fed noted in the report.
The report was the first since last May to show an outright drop in activity in some Fed districts.
While contacts in most countries reported economic gains, the Districts of New York and Philadelphia said activity had weakened and the District of Cleveland reported a loss of momentum due to the increased infections. The districts of St. Louis and Kansas City reported little change.
A majority of the Fed districts said employment increased, although the pace was slow. Even more troubling, “an increasing number of districts have reported declining employment levels” since the compilation of the previous beige book.
The manufacturing, construction and transportation industries continued to create jobs, but the report states that “contacts in the leisure and hospitality sectors have reported further job cuts due to measures more stringent containment “.
Adapt to a new environment
The US economy shed 140,000 jobs in December as the country faced an upsurge in COVID-19 infections, the first job loss in eight months and a sign that the economic recovery could lose momentum.
As difficult as the environment is for many consumer-focused businesses, the report also pointed out that some of them are adjusting to a rapidly changing COVID-19 operating environment.
In the Fed’s Boston District, for example, a clothing retailer reported that store foot traffic was still down 30% from the previous year, but year-to-year sales were other in November were up about 5% due to strength in online shopping and other factors.
“With modest increases in sales throughout 2020, this retailer made larger profits due to lower store operating costs and smaller promotions than in recent years,” the report says.
Analysts and Fed officials also say there is reason to believe the economy could rebound in the second half of 2021, supported by the release of coronavirus vaccines and a new wave of government aid linked to the pandemic.
A $ 900 billion relief package adopted in late December is expected to help support the economy until northern hemisphere spring and expectations are high. President-elect Joe Biden’s new administration will step up the stimulus and step up. efforts to combat the virus.
Beyond increasing expectations for economic growth this year, the vaccine launch may already help specific parts of the economy, given the specific cold storage needs needed to prevent vaccines from spoiling. Some ethanol producers have been “aided by the growing demand for byproducts such as carbon dioxide for dry ice,” the Chicago District Fed reported.
Fed officials reiterated their pledge to keep short-term interest rates low and to keep central bank asset purchases until the economy is on a more stable footing. The next Fed policy meeting is scheduled for January 26-27.
The Beige Book was prepared at the San Francisco Fed based on information gathered on or before January 4, 2021.