Fed’s Beige Book shows ‘modest to moderate’ growth in U.S.

Growth Outlook

Economic growth will ease this quarter to a 1.7% annualized rate, according to the median forecast of economists in a Bloomberg survey. The second half will show improvement, with GDP projected to climb 2.2% in the third quarter and 2.6% in the fourth quarter.

The economy has “weathered political storms like the fiscal cliff, the Eurozone crisis and the slowdown in China, and all of these point to a fairly sustainable and solid recovery,” Brian Jacobsen, who helps oversee $221.2 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said before today’s Beige Book report. “We’re still adding jobs but it’s just not a lot of jobs. There aren’t as many as we’d like to see.”

Payrolls Gain

Companies in the U.S. boosted employment by 135,000 workers in May, figures from the Roseland, New Jersey-based ADP Research Institute showed today. The median forecast of 40 economists surveyed by Bloomberg called for an advance of 165,000.

A Labor Department report in two days may show that total employment, including government workers, rose by 165,000 in May, based on the median estimate of 86 economists in a Bloomberg survey. That’s the same as the gain in April.

Government spending reductions known as sequestration, which began in March, and a payroll-tax increase at the start of the year may slow growth this quarter, putting a damper on hiring as businesses assess the damage.

The increase in the payroll tax is slowing sales at Minneapolis-based Target Corp., the second-largest U.S. discount retailer, where about a third of sales come from customers who earn less than $50,000 a year, according to John Mulligan, the firm’s chief financial officer.

“The payroll tax increase had a significant impact on them,” Mulligan said in a May 30 presentation. “They were struggling before. They’re struggling now. And we continue to see that in our business.”

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