The U.S. economy expanded at a modest to moderate pace across most of the country amid rising consumer demand for homes and autos, the Federal Reserve said.
“The majority of districts reported modest improvements in labor market conditions, although hiring plans were limited in several districts,” the central bank said in its Beige Book business survey, which is based on reports from the Fed’s 12 regional banks. “Residential real estate markets strengthened in nearly all districts and home prices rose amid falling inventories across much of the country.”
The anecdotal snapshot of the economy helps the Federal Open Market Committee evaluate whether the labor market shows signs of the substantial improvement it says would warrant shrinking or halting $85 billion in monthly bond purchases. The committee is scheduled to meet March 19-20.
Companies added 198,000 workers last month, more than projected and an indication the job market will keep expanding, according to figures released today by the Roseland, New Jersey- based ADP Research Institute. The jobless rate, while falling from a 26-year high of 10% in 2009, has stayed at 7.8% to 7.9% since September.
“We’re tracking growth right now that looks positive but not very exciting,” said Michael Feroli, chief U.S. economist at New York-based JPMorgan Chase & Co. and a former researcher for the Fed Board in Washington. “House prices continue to go up. So far that seems to be holding up pretty well and doesn’t show any signs of faltering in the new year.”
The U.S. economy “generally expanded at a modest to moderate pace since the previous Beige Book,” the Fed said in a description that was similar to the prior report. Five districts reported economic growth was “moderate” and five as “at a modest pace,” with the Boston district expanding “slowly” and Chicago activity “at a slow pace,” the Fed report said.
Manufacturing tied to home construction “was a source of strength for many Districts,” the report said. It cited wood product manufacturing in St. Louis and San Francisco, household goods production in the Chicago region and cement makers in Dallas.
Housing has gained as Fed easing pushed mortgage rates to record lows. Home prices rose 6.8 percent in December from a year earlier, according to the Case-Shiller 20 City index, the fastest increase since 2006. The gauge rose every month last year. New home sales accelerated in January to a 437,000 annual pace, the highest since 2008.