By Howard Schneider and Ann Saphir
WASHINGTON (Reuters) – U.S. Federal Reserve officials saw “little or no growth” in four of their 12 regional districts and only modest growth in the others in recent weeks amid a rapidly spreading health crisis and the impact of a recession that has devastated some businesses and families even as many others thrive.
In the Philadelphia region and much of the Midewest “activity began to slow in early November as COVID-19 cases surged,” the U.S. central bank said on Wednesday in its latest “Beige Book” compendium of anecdotes from businesses across its 12 reserve districts.
While some sectors like manufacturing did well, signs of stress mounted in others, as bank loan portfolios weakened, some firms struggled to find workers, and others announced fresh layoffs.
“Banking contacts in numerous Districts reported some deterioration of loan portfolios, particularly for commercial lending into the retail and leisure and hospitality sectors,” Fed officials reported. “An increase in delinquencies in 2021 is more widely anticipated.”
The reports, collected before Nov. 20, included stories of factory managers struggling to find workers to help meet a boom in goods sales, even as hard-hit restaurant and hospitality businesses continued to face depressed demand for in-person services because of the coronavirus pandemic.
“Firms that were hiring continued to report difficulties in attracting and retaining workers,” the Fed said, with the spread of the virus causing new school closings that had impacted people’s ability to work.
In the Boston region for example “many hotel workers across the region remained furloughed,” though “most manufacturing respondents said they were hiring; some reported difficulty finding workers.”
But even that varied by business line.
“A supplier to commercial aviation announced major layoffs over the summer and has not had any reason to revise those plans either up or down,” Boston Fed officials noted.
The divide among regions and sectors that are doing well and those that are not has become a hallmark of the current recession and presents the Fed with a difficult decision as it debates whether to provide more support for the economy at its Dec. 15-16 policy meeting.
The economy is continuing to recover from the deep blow it suffered at the start of the pandemic, and the prospect of a coming COVID-19 vaccine means the recovery could gain steam next year.
In the meantime, the country is 10 million jobs short of where it was in February, a large hole to fill with the pace of job creation slowing in recent months.
The job numbers for November will be released on Friday and are expected to show that slowing continued as the holiday season approaches, with some analysts now predicting an outright job loss.
The common culprit is a pandemic that has spread with a vengeance this fall, and is now infecting more than 1 million people each week and killing around 1,500 per day.
In some states and cities that has led officials to impose new restrictions on businesses and social gatherings. In others households are pulling back for their own protection.
Sharply rising COVID-19 cases triggered a “downward trend” in November in the Philadelphia Fed district, and the Minneapolis Fed reported signs of “softening.”
St. Louis reported conditions “deteriorated” toward the end of the survey period, which went through Nov. 20. Kansas City reported a pullback in consumer spending in November in retail, restaurant, auto and tourism sales.
In the Cleveland district, about a third of contacts said they expected their staffs to be below pre-pandemic levels a year from now, with many businesses hesitant to hire because of uncertainty over the virus.
(Reporting by Howard Schneider; Editing by Paul Simao and Chizu Nomiyama)
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