The pace of the recession has slowed or stabilized in most areas of the United States, the Federal Reserve said on Wednesday in a report that pointed to protracted job market weakness even as the economy transitions to recovery.
Labor markets across the country were extremely soft, with little upward pressure on wages, the Fed said in its Beige Book survey of economic conditions through July 20.
Wages and compensation were steady or falling in most areas, said the Fed -- the U.S. central bank. Employers reported different methods of cutting pay in addition to, or instead of, freezing or lowering wages, it added.
Stocks slipped on the report's suggestion that the jobs picture may be gloomy for a while.
Consumer spending, residential and commercial real estate, tourism, labor markets ... soft, soft, soft, soft, and soft, said Jennifer Lee, an economist with BMO Capital Markets Research in Toronto. I expected the overall tone to be a little less subdued, she said.
The Fed has slashed benchmark interest rates to near zero and pumped hundreds of billions of dollars into the economy to counter the worst financial crisis since the Great Depression of the 1930s.
Fed officials say they expect growth to return in the second half of the year, but warn they expect the recovery will be sluggish and high unemployment will persist for a while.
The Fed has promised to keep benchmark rates exceptionally low for an extended period and to keep its supportive policies in place to support the fragile turnaround.
Factory activity was depressed in many areas although the Fed said some districts saw signs of modest improvement.
We passed the eye of the storm about four weeks ago, one North Carolina textile manufacturer told the Fed.
Residential real estate markets were weak in most districts although many reported evidence things were getting better. The outlook for commercial real estate -- which Fed officials have cited as a potential looming problem -- was mixed, with some Fed contacts forecasting further deterioration into late 2010.
Commercial real estate markets weakened in two thirds of Fed districts and remained slow in others, the Fed said.
(Editing by James Dalgleish)