Off The Wire
Fed says U.S. recovery was modest in early 2021, job gains slow
WASHINGTON (Reuters) - The U.S. economic recovery continued at a modest pace over the first weeks of this year, with businesses optimistic about the months to come and demand for housing “robust,” but the job market only showing slow improvement, the Federal Reserve reported on Wednesday.
“Economic activity expanded modestly from January to mid-February for most Federal Reserve Districts. Most businesses remain optimistic regarding the next 6-12 months as COVID-19 vaccines become more widely distributed,” the U.S. central bank reported in its latest “Beige Book” compendium of anecdotes about the economy.
“Most Districts reported that employment levels rose over the reporting period, albeit slowly,” the Fed said, an outcome disappointing to officials who have hoped their efforts to support the recovery would pay off in faster job creation.
Perhaps most notably, the parts of the economy hardest hit by the coronavirus pandemic, including the leisure and hospitality sectors, have shown little improvement, and commercial real estate investments tied to those industries “deteriorated somewhat,” the Fed said in its report.
The Fed holds its next policy meeting in two weeks, at a time of increased optimism the coming year will see risks from the pandemic subside, and the economy register strong growth.
The boost in the economic outlook, driven by the country’s expanding COVID-19 vaccination program and the potential for a $1.9 trillion federal spending package, has prompted market speculation the Fed may be forced to scale back its support for the economy sooner than expected.
Federal officials in recent days have rebutted that idea by noting the long list of problems still facing the economy, from high joblessness to weak inflation, that would need to ease before it considers any change in monetary policy.
Reporting by Howard Schneider; Editing by Paul Simao