From Boston to Atlanta to San Francisco, the economy has gotten worse in the last two months, and in a snapshot of economic conditions released Wednesday, business executives were pessimistic about the chances for a near-term recovery.
“The deterioration was broad based,” with only a few exceptions, the Federal Reserve said in its beige book, a regular sketch of economic conditions in 12 Fed districts nationwide. Many do not expect a recovery until late 2009 or early next year.
The report said that “with rising layoffs and hiring freezes, unemployment has risen in all areas,” a point underscored by a new index that showed private sector job loss increased in February.
ADP Employer Services said that employers cut 697,000 jobs in February compared with a revised 614,000 jobs lost in January.
The government releases its unemployment report for February on Friday.
In the beige book, the Fed said that manufacturing fell, companies earned less and credit remained tight. Fewer tourists visited popular destinations, airline traffic fell and the demand for commercial real estate “weakened significantly.”
There were a few, faint silver linings: Philadelphia and Chicago reported that their regional economies “remained weak” but did not get weaker. Consumer spending picked up slightly after a dismal holiday shopping season, and prices eased because of weakened demand. Some information technology companies reported a rise in business as other companies looked to cut costs through the use of technology.
Residential real estate offered “minimal and scattered” signs of stabilization in some regions, although the Standard & Poor’s Case-Shiller home price index data show that prices nationwide are still falling. Single-family home prices tumbled 18.5 percent in December from the previous year, and real estate agents say that nonforeclosure sales are still stagnant.
“House prices continued to decline, reportedly at double-digit paces in some areas, with little or no signs of a deceleration evident,” the beige book said. “Builders in various districts generally remain pessimistic regarding recovery prospects this year, and consequently the pace of new home construction declined further in most areas.”
Real estate sales in Manhattan, where prices have remained high despite the economic crisis, fell 60 to 65 percent from last year.
Consumers changed their spending habits as they worried about losing their jobs, turning to discount chains instead of traditional department stores and specialized retailers, the report said.
Sales of jewelry, electronics and other luxury goods declined sharply in the Philadelphia, Richmond and Chicago districts of the Fed, and other areas reported that the demand for furniture and appliances also decreased.
Automakers continued to languish, with sales of new cars and light trucks “exceptionally sluggish,” but there were some signs of life in used-car sales, according to the beige book.
On Tuesday, major automakers reported that their vehicle sales continued to slide in February, and were down 4.9 percent from January and 41 percent from February 2008.
Consumers were not cutting back just on sweaters, stereos and sport utility vehicles. Health care providers reported seeing fewer patients as people chose to put off elective procedures. Demand for legal services, accounting and consulting fell in several Fed districts.
In another report released Wednesday, the service sector shrank further in February but by less than expected.
The Institute for Supply Management said that its nonmanufacturing index was 41.6 in February compared with 42.9 in January. The level of 50 separates expansion from contraction in the index.
