WASHINGTON - The economy's recovery continued at the end of 2009, spreading to more parts of the country, but remains too weak to bring down unemployment, the Federal Reserve said in a report Wednesday.
In its latest beige book, the Fed said economic activity was improving slightly as 2010 started, but remained at a "low level" especially due to weakness in labor and commercial real estate markets.
The central bank said 10 districts reported some increased activity or improvement in economic conditions, while the remaining two - Philadelphia and Richmond - reported mixed conditions. In the previous survey published Dec. 2, the Fed said eight districts had shown improvements.
The beige book is a summary of economic activity prepared for background use at the central bank's next policy-setting meeting Jan. 26-27. The latest report, prepared by the Federal Reserve Bank of Philadelphia, examined economic conditions across the Fed's 12 districts from Nov. 21 through Jan. 4.
"Most districts reported that consumer spending in the recent 2009 holiday season was slightly greater than in 2008, but still far below 2007 levels," the report said.
There were some exceptions, however. New York City's Broadway theaters reported weaker attendance this past holiday season than in 2008, the beige book said.
Retailers in the Philadelphia and San Francisco districts noted that the small gains in 2009 did not represent a significant shift in trend since 2008 sales were so low compared with 2007.
Consumer spending, a key growth engine for the economy, started to recover slightly in the second part of 2009, helped by a massive government stimulus.
Emerging from its worst recession in decades, the economy expanded by an annualized 2.2% in the third quarter of last year and is expected to grow at a stronger pace in the final three months of 2009. But a fading stimulus is expected to keep unemployment high and inflation subdued this year, conditions that would prompt the Fed to keep interest rates at a record low near zero.
Although some hiring was reported in a few districts, the jobs market remained weak, the central bank report said.
"Labor market conditions remained soft in most Federal Reserve districts, although New York reported a modest pickup in hiring," the beige book reported.
The economy shed a higher-than-expected 85,000 jobs in December and the unemployment rate remained at a lofty 10%, data showed last week. The jobless rate would have been even higher if more people had been looking for work instead of leaving the work force altogether.
Residential construction activity stood at low levels in most areas, while nonresidential real estate conditions remained soft in nearly all 12 Fed districts, the central bank survey showed.
Price and wage pressures remained subdued in nearly all districts, though increases in metals prices were reported in Boston, Cleveland, Minneapolis, Dallas, and San Francisco, the beige book said.
Low inflation and a persistently high jobless rate are expected to lead the Federal Open Market Committee to keep the fed funds rate near zero when it next meets Jan. 26-27.
