(Bloomberg News) The U.S. economic expansion improved last month across most of the country while hiring was limited and housing remained stagnant, the central bank said.
The economy "expanded at a modest to moderate pace" from late November through the end of December on increased holiday retail sales, demand for services and oil and gas extraction, the Fed said in its Beige Book anecdotal business survey released today in Washington. At the same time, most industries saw "limited permanent hiring," and the housing market remained "sluggish."
The report may reinforce the views of a majority of Fed officials, who see an economy that's expanding without being strong enough to reduce joblessness as quickly as they would prefer. The unemployment rate dropped to 8.5 percent in December from 9.4 percent a year earlier. Fed officials are also urging lawmakers to try more housing-aid programs.
"The reports on balance suggest ongoing improvement in economic conditions in recent months," the Fed said in today's report, which comes out two weeks before each meeting on monetary policy. "The combination of limited permanent hiring in most sectors and numerous active job seekers has continued to keep a lid on general wage increases."
Even so, a few regional banks "highlighted significant supply constraints and in some cases large compensation increases for workers with specialized skills" in areas such as energy and technology, the Fed said.
U.S. stocks fell, with the Beige Book failing to sustain a rebound earlier today. The Standard & Poor's 500 Index slipped 0.2 percent to 1,289.00 at 2:25 p.m. in New York, retreating from a five-month high. The index had recovered from a 0.5 percent morning loss about 10 minutes before the release of the Beige Book at 2 p.m.
The last Beige Book, released Nov. 30, said the economy expanded at a "slow to moderate" pace in 11 of 12 districts, led by gains in manufacturing and consumer spending. St. Louis was the only region to report a "decline in economic activity."
The Federal Open Market Committee next gathers Jan. 24-25 in Washington as officials debate whether to try new actions to lower borrowing costs. Fed policy makers will for the first time publish projections for the benchmark federal funds rate and will also update their forecasts for economic growth, unemployment and inflation.
Today's report reflects information collected on or before Dec. 30. The 12 regional banks' reports were summarized by staffers at the San Francisco Fed.
The economy probably expanded at a 3.3 percent annual pace in the fourth quarter of 2011, according to an estimate by Macroeconomic Advisers LLC yesterday, after a 1.8 percent rate in the prior three months.