Fed sees signs of hope
Periodic Beige Book report sees economic improvement in most of U.S.
March 6, 2002: 2:44 p.m. ET
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NEW YORK (CNN/Money) - The Federal Reserve saw signs of economic recovery in the United States in January and early February, according to its periodic Beige Book report, released Wednesday, echoing the cautious optimism expressed recently by Fed Chairman Alan Greenspan.
The report, published eight times a year and named for the color of its cover, is a compilation of anecdotal information from the 12 Federal Reserve banks around the country. The latest report found economic activity increasing in nine of the 12 districts. Cleveland said its condition was unchanged from the end of 2001, New York reported "mixed signals," and Dallas said activity was still weak.
"The Fed's Beige Book acknowledges some of the improvement evident in recent economic data, but the tone of the survey could not yet be described as a ringing endorsement of the recovery story," said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd.
The U.S. economy has been in a recession since March 2001, according to the respected National Bureau of Economic Research, which defines expansions and recessions according to criteria such as employment and industrial production.
To keep consumers spending during the downturn, the Fed cut its target for short-term interest rates 11 times in 2001. But it decided to leave rates alone at its first meeting in 2002, and Greenspan recently said a recovery, albeit muted, was on the way.
The Fed apparently did its job well, as consumer spending remained healthy throughout the downturn and may have helped the economy avoid a recession as commonly defined, two straight quarters of shrinking gross domestic product (GDP). GDP shrank in the third quarter, but expanded at an annual rate of 1.4 percent in the fourth, according to government data.
Consumer spending held strong despite a worsening labor market and an unemployment rate that many economists expect to swell to 6.0 percent this year. The Fed's Beige Book report found "slack" labor markets in most districts, but it saw a glimmer of hope even in that area, which usually worsens even as the economy begins to recover.
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"Contacts at temporary employment firms in several districts suggest employment is bottoming out, and new hires in selected occupations are said to be in short supply," the report said.
The manufacturing sector bore the brunt of the slowdown, but recent reports from the nation's purchasing managers and the Commerce Department have indicated it could be on the mend. The Beige Book report said most districts saw continued weakness in manufacturing in January and early February, but "selected industries in some areas are showing more positive results."
Eight of the 12 districts reported "modest improvement" in retail sales from the end of 2001, while sales figures were "mixed" in the other districts. 
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