The US economy has continued its slow growth, but harsh snowstorms crimped activity in some parts of the country last month, a Federal Reserve report said.
The Fed’s Beige Book survey, released on Wednesday, showed that the nation’s recovery was plodding ahead, though not at a strong enough pace to persuade companies to ramp up hiring. The Fed said “economic conditions continued to expand ... although severe snowstorms in early February held back activity” in some places.
Of the Fed’s 12 regions surveyed, the Richmond district, which includes Maryland, Virginia and the Carolinas, was hurt the most by the bad winter. That region reported economic activity had “slackened or remained soft across most sectors” because of the weather.
Although economic setbacks from the weather are temporary, they come at a fragile time: The economy is struggling to recover from the worst and longest recession since the 1930s.
After a big growth spurt at the end of last year, many economists believe the recovery lost steam in the first three months of this year. They predict it will grow at a pace of approximately 3 percent from January to this month. That won’t be fast enough to drive down the unemployment rate, now at 9.7 percent.
Even though companies have slowed the pace of massive layoffs, they aren’t in the mood to hire. The jobs market “remained soft throughout the nation,” the Fed reported.
When the government releases its new employment report today, analysts expect it will show that the unemployment rate nudged up to 9.8 percent last month as companies slashed 50,000 jobs. The snowstorms, however, could lead to much steeper job losses for the month.
With the economy only slowly healing, Federal Reserve Chairman Ben Bernanke told Congress last week that record-low interest rates were still needed to support economic activity. The Fed has held its key rate near zero for more than a year and is expected to keep it there at its next meeting on March 16. The rationale: super-low rates will induce Americans to boost spending, which would aid economic growth.
“The country is not living out a post-recession, post-crisis story ... We’re in an early chapter of the story, and the ending is uncertain — quite uncertain,” Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said during a speech in New York on Wednesday.
The Fed’s survey said that consumer spending did show signs of improvements in many parts of the country. However, retailers in the Richmond region said sales were hurt by last month’s snowstorms.
Merchants in the Philadelphia region said sales had been improving before the snowstorms hit. Tourism activity in New York City, which did pick up before the storms, also got pinched early last month because of the bad weather.
Meanwhile, manufacturing strengthened in most parts of the country, especially for high-tech equipment, automobiles and metals.
Factories in the Philadelphia and Richmond regions, though, said there were production delays because of the snowstorms. Some were able to make up the losses by having people work longer hours and extended shifts.
Demand for services was generally positive, particularly for health care and information technology firms.
A separate report out Wednesday said that the service sector last month logged its fastest growth in more than two years, though jobs remained elusive. The Institute for Supply Management’s index rose to 53 last month from 50.5 in January. Any level above 50 signals growth.
Bad weather hampered home sales and construction in regions, including New York, Philadelphia and Atlanta. It was also blamed for some of the sluggishness in car sales in some places.
Given the precarious state of the economy, Americans had little appetite to take out new loans, and most banks are still cautious about lending, the Fed report said. Lending is not back to normal, another reason why the recovery is expected to be only gradual.
“Economic activity is getting better — in fits and starts,” said Jennifer Lee, senior economist at BMO Capital Markets.
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