Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Economic activity continued to increase in much
of the country in July and August according to the US Federal
Reserve's latest Beige Book report, containing anecdotal
information from regional business contacts, but increasing
COVID-19 outbreaks and heightened uncertainty around the course of
the pandemic put the brakes on the recovery in Texas and resulted
in stagnation in the Northeast. Hiring lost momentum over the
summer as COVID-19 cases rose in the South and concerns around
infection risk, childcare, and the coming school year limited
employment growth in many regions. Retail sales dipped sharply in
Texas as the pandemic ballooned while the ongoing travel recession
limited consumer spending gains in tourism-heavy metros in
California, the Northeast, and the South. The continued restart of
automotive manufacturing plants boosted steel production in the
Midwest, but weak activity in the Northeast and declining new
orders elsewhere point to a slower end of the year. Homebuilding
activity was modest outside the Northeast and was brisk in the
West, but strong homebuyer demand overwhelmed the market in the
South as low mortgage interest rates coaxed buyers into the
market.
Consumer spending rose in many parts of the
country as auto sales remained strong, but retail sales and
spending from tourism and travel was mixed. Tight inventories of
new cars following the spring manufacturing shutdowns restrained
sales in Texas, areas around the Great Lakes, and in New York, but
used-car sales boosted dealership activity. Retail sales in Texas
plummeted as COVID-19 cases rose sharply, but both have since
leveled off. "Virtually nonexistent" business travel and convention
activity weighed on leisure and hospitality sectors in Texas, the
Northeast, and the major metros of the Midwest. Restaurants in
Pennsylvania sustained themselves on outdoor dining and takeout but
grew wary of the arrival of cold weather. Air travel remained
stagnant and had negative impacts on California and Texas tourism
hubs, with many airports seeing few if any international visitors.
Hotels, museums, and tourist attractions in the South struggled to
boost business while contending with social distancing capacity
restrictions and weak demand.
Labor markets expanded slightly but the pace of
hiring ticked down noticeably in many parts of the country while
employment levels remained far below pre-pandemic levels
everywhere. While employment rose strongly in Illinois, Michigan,
and areas around Lake Michigan, weak customer demand and increased
uncertainty resulted in sluggishness in the rest of the Midwest.
Many firms began making permanent layoffs to cut costs. Businesses
in the South continue to recall furloughed workers slowly as demand
recovers, but concerns around potential infection, childcare
arrangements, and uncertainty around virtual schooling are leading
to difficulties in hiring. Infection risk is less of a concern
among recalled workers in the Northeast, a region that has seen
declining cases over the past two months. Nonetheless, some firms
continue to make permanent job cuts. Employment outlooks at hotels,
tourism businesses, and transportation firms in the West,
Northeast, and South are grim as travel demand remains limited.
Manufacturing activity rose modestly in the
Midwest and Great Lakes regions as automotive manufacturing plants
continued to resume operations. Steel producers in Ohio, Missouri,
and Kentucky saw boosts in activity, and many indicate they are
running at full operation. Aviation and aerospace manufacturers and
suppliers in the Northeast and Midwest continue to see weak
business as travel remains depressed amid the ongoing pandemic and
sharply reduced airline operations. Overall manufacturing activity
in the Northeast was tepid and "slowed to a crawl" in New York.
Food production and home goods production led modest gains in the
South. Manufacturers in the upper Midwest noted greater concern
about the rest of 2020 and the beginning of 2021 as new orders and
business continued to decline.
Construction activity struggled to keep up with
demand for homes in Georgia, Tennessee, and Florida as low mortgage
interest rates pushed many buyers into the real estate market.
Surging home sales in Virginia and the Carolinas led to many homes
being sold "sight unseen." A similar pattern continued to occur in
the Midwest and Great Lakes area as low rates and increasingly
tight inventories of single-family homes create a "sense of
urgency." Many homebuyers who expect to work remotely demonstrated
their desires for less-crowded suburban locales and larger living
spaces. Homebuilding remained very sluggish in the Northeast with
construction in Pennsylvania limited by lumber and labor-supply
problems. Nonetheless, very strong demand for single-family homes
prevailed throughout the region.
Outlook
This month's Beige Book pointed to continuing gains in
manufacturing and homebuilding activity in the Midwest and South,
but slowing employment growth in the Northeast, Great Lakes, and
West as the COVID-19 pandemic remains a looming presence in the
state economies. Although almost all areas saw restaurants and
retailers reopen their doors, capacity constraints on restaurants,
tourist attractions, and limitations on large events will slow the
pace of the consumer spending recovery. Depressed travel and
tourism along with the long-term duration of social distancing
measures will limit employment and spending growth in places like
California, the South, and major cities of the Northeast and
Midwest that depend on conventions, conferences, and foreign
tourists. States in the Northeast and Midwest that had better
initial success at slowing the spread of COVID-19 will see
relatively stronger hiring and spending in the near term, but
raging outbreaks in other parts of the country will threaten their
recoveries.
Posted 09 September 2020 by James Kelly, Senior Economist