Economic growth keeps picking up steam

12/05/2014

Economic growth keeps picking up steam

WASHINGTON – Dec. 4, 2014 – The economy improved broadly in late October and November, with job growth, consumer spending and business investment all picking up and retailers optimistic about the holiday season, the Federal Reserve said Wednesday.

Manufacturing and construction activity also increased, while the housing market remained a mixed bag, depending on the region, according to the Fed's "beige book" report, which provides an anecdotal look at the economy.

The latest report took a decidedly more positive view of the labor market than previous editions, perhaps signaling continued strong job growth. "Employment gains were widespread across" the 12 Federal Reserve Bank districts, the beige book said.

Wage growth, which has been modest throughout the recovery, remained "subdued," though there were pockets of nascent wage pressures.

Tumbling gasoline prices helped offset workers' largely stagnant earnings, lifting consumer spending in several regions and boding well for the holiday shopping season. The period covered by the report ended Nov. 24, before the start of seasonal sales.

Consumer purchases of durable goods, such as appliances, were solid in the San Francisco and Richmond, Va., areas. Auto sales were especially brisk in the Atlanta, Chicago and San Francisco markets, and lower gasoline prices boosted sales of SUVs and light trucks in Philadelphia, Cleveland and Chicago.

Meanwhile, ski resorts in the Richmond and Minneapolis regions opened early following an early blast of winter, and Broadway theater revenues in New York City were moderately higher than a year ago. Both tourism and restaurant sales, however, fell in Kansas City.

Businesses also were in a spending mood, increasing outlays for employees as well as inventory and equipment. Firms in Boston beefed up payrolls in information technology. Employers also ramped up hiring for financial workers in New York, manufacturing and construction employees in Cleveland and hotel and restaurant staffers in Atlanta.

Companies continued to struggle to fill high-skill positions in engineering, legal and health care services. There was little change in holiday hiring compared with last year.

The hunt for skilled workers pushed up wages as employers in New York, Chicago and San Francisco doled out raises both to attract candidates and retain "high-value, long-term existing employees." Encouragingly, there were also early signs "of wage pressures for lower-skilled jobs, whose wages have been flat for several years."

Firms also increased spending more broadly. Retailers and manufacturers in Chicago and Richmond built up inventories to prepare for the possibility of another brutal winter that delays deliveries. Manufacturers in several areas expanded capital budgets "both to replace existing equipment and to expand capacity."

Manufacturing also continued to gain, particularly the automotive and aerospace industries. Steel production increased in Cleveland, Chicago and San Francisco. High-tech manufacturers in Boston, Dallas and San Francisco reported steady growth in demand.

Falling oil and gas prices are generally aiding companies, but chemical manufacturers in the Boston area said the decline has made them less competitive globally because they rely on natural gas as a feedstock, while foreign producers typically use oil.

The housing and construction markets expanded overall, but only about half the districts cited an increase in home sales. Commercial construction was a bright spot, as office building picked up in New York and Philadelphia and industrial projects gained in Cleveland, Chicago and Dallas.

AP Logo Copyright 2014 USA TODAY, Paul Davidson; Mike Hutmacher, AP

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