WASHINGTON -- U.S. economic growth picked up a bit as summer ended and fall began, supported by modest hiring, an uptick in consumer spending, and steady homebuilding, according to the Federal Reserve.
The Fed’s “Beige Book” survey of economic conditions in its 12 regional bank districts, released Wednesday, found that growth was modest or moderate in eight districts, slight in three, and flat in the New York district. That’s an improvement from its September survey, which found that growth weakened in two districts and was unchanged in two.
The mild improvement could encourage Fed policymakers to lift short-term interest rates by their December meeting.
But not all Fed observers agreed that conditions are ripe for a rate hike.
“As the Fed argues the case for a rate hike has “strengthened,” the data suggest the economy is on increasingly weaker footing with little improvement to speak of over the past nine months since liftoff,” emailed Lindsey Piegza, chief economist, fixed income, at Stifel Nicolaus. “Against the backdrop of a sizable downgrade to the committee’s own internal forecast for longer-term growth, the current uneven state of the economy should continue to hold off a further removal of accommodation, at least for the time being.”
Hiring was steady across most of the country, though there were layoffs at factories in the New York, Philadelphia, Cleveland and Richmond districts. Steady job gains lifted wages in most districts.
The Beige Book’s broad picture of a modestly improving economy is consistent with most economists’ estimates that growth will quicken in the July-September quarter. The economy will likely grow at a roughly 2 percent to 2.5 percent annual pace, most analysts forecast. That would be up from a tepid 1.1 percent pace in the first half of the year.
The report is based on discussions with business leaders in each region and will be considered at the Fed’s next meeting Nov. 1-2. Wednesday’s Beige Book covered the period from late August through Oct. 7.
Fed policymakers at the November meeting will weigh whether to raise the short-term interest rate that they control.
Most analysts expect the Fed to stand pat next month and wait to make any moves after the elections. If the economy keeps growing, economists expect the Fed to hike in December.
The rate was pinned at nearly zero for seven years during the Great Recession and slow recovery. The Fed increased it to between one-quarter and one-half a percentage point last December.
The survey found that employers reported offering higher pay for many skilled workers in industries such as construction, manufacturing, health care and information technology.
But similar pressures also appeared in lower-skilled industries: Retailers and tourism operators in New England were forced to raise wages to attract workers, the Boston district said.
The Richmond district said businesses were struggling to find construction workers, hotel and restaurant staff, farm hands, engineers and managers.
Consumer spending was healthy overall. Sales of luxury goods were strong in the San Francisco district. Attendance at Broadway theater shows in the New York district rose in September and was higher than a year ago.
Auto sales were flat or declined in about half the Fed’s regions, including New York, Philadelphia, Cleveland, Atlanta and Kansas City. Yet they grew in other districts, including St. Louis and San Francisco.