Fed shows business is slowing in virus surge
A Federal Reserve survey of business conditions around the country found that economic activity in several regions slowed in November as coronavirus cases surged.
The Fed report released Wednesday said that overall, the Fed’s 12 regional banks characterized the economic expansion as “modest or moderate.” But it noted that three Midwest regions and the Philadelphia region reported activity began to cool in early November as COVID-19 cases surged.
The report said that most districts found that local businesses’ optimism has waned, with many citing concerns about thewave of virus cases and renewed lockdown restrictions.
The report also said there was concern about the looming expiration dates for government support programs, including extended unemployment benefits and the moratoriums that have been in place on evictions and foreclosures.
The report, known as the beige book, will be used by Fed officials when they hold their last meeting of the year on
Dec. 15-16 to discuss possible changes to the central bank’s interest rate policies.
In response to the deep recession brought on when the virus struck with force in March, the Fed slashed its key interest rate to a record low and began buying billions of dollars in Treasury bonds and mortgage-backed securities to push down long-term rates.
The Fed is expected to maintain its ultralow interest rates over the next three years. But it may also decide as soon as this month’s meeting to expand the support it is providing through its bond purchases, especially if Congress is unable to pass further economic relief legislation in the lame-duck session.
At a congressional hearing Wednesday, Fed Chairman Jerome Powell said that increased support from Congress is needed as a bridge between the current economic troubles and the time next year when a virus vaccine is expected to be widely available.
The new Fed survey said that while employment increased during November, the pace of job gains was slow at best.
Many of the Fed’s business “contacts noted that the sharp rise in Covid-19 cases had precipitated more school and plant closings and renewed fears of infection, which have further aggravated labor supply problems,” the report said.
“Providing for childcare and virtual schooling needs was widely cited as a significant and growing issue for the workforce, especially for women.”
The Fed survey said that the staffing issues had prompted some companies to extend greater accommodations for flexible work schedules.
The Fed’s Richmond regional bank said the economy of the Fifth District — Virginia, Maryland, the District of Columbia, North Carolina, South Carolina and most of West Virginia— expanded at a moderate rate in recent weeks.
Even though some sectors reported strong growth, most businesses in the Fifth District reported demand or sales at levels below their prepandemic or year-ago levels.
Employment continued to rise, but some firms looked to invest in technology or automation rather than hiring more workers, the Richmond Fed said. Overall, price growth was little changed as prices received by firms grew modestly.
Manufacturers said they experienced robust growth in shipments and new orders and, in some cases, demand exceeded capacity as producers were constrained by labor and supply chain factors.
The Philadelphia district reported that sharply rising COVID-19 cases in November had “heightened concerns over anticipated layoffs, foreclosures, evictions and bankruptcies.”