WASHINGTON – Activity in the American economy expanded only “modestly” in recent weeks but firms are becoming more upbeat about their prospects as Covid-19 vaccines are rolled out nationwide, the Federal Reserve said.
However, the employment gains are slow and companies are again reporting difficulty finding and retaining workers, the Fed said in its “beige book” survey of economic conditions.
Even in the New York region, the only one of the Fed’s 12 districts to see activity slow, businesses “have grown considerably more optimistic about the near-term outlook,” the report said.
“Most businesses remain optimistic regarding the next six to 12 months as Covid-19 vaccines become more widely distributed,” the report said, citing information collected nationwide through late February.
“Most districts reported that employment levels rose over the reporting period, albeit slowly.”
Manufacturing remains a bright spot nationwide, although factories are complaining of price increases for inputs and shortages – notably of semiconductors, which has hit the auto industry.
That was part of a wider trend of price increases for components like fuel, steel and lumber, though few businesses reported raising prices for customers, the Fed said.
Meanwhile low mortgage rates continues to spur “robust demand” for homes, the Fed said.
In a throwback to the pre-pandemic economy when US unemployment was at a 50-year low, the beige book reported some companies saying they’ve had to raise wages to find and hang onto workers in key sectors, both skilled and low-skilled.
An ongoing issue for employers is the pandemic-imposed closure of schools and daycare facilities, which means, “a significant portion of the potential labour force remains sidelined by childcare responsibilities, especially women,” according to the Philadelphia Fed.
The report was prepared in advance of the meeting later this month of the cental bank’s policy-setting Federal Open Markets Committee (FOMC), though policy makers have said they won’t raise their benchmark interest rate until inflation has passed the 2 per cent mark.