Fed’s Beige Book Provides No Reason To Hope

The Fed is out with its Beige Book report and – big surprise here – it’s generally awful.

Reports from the Fed’s 12 regional banks “suggest that national economic conditions deteriorated further” in January through late February, the Fed said in what is known as the beige book, which summarizes largely anecdotal economic conditions in advance of the March 17-18 Federal Open Market Committee.

“Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010,” the Fed said.

The report also confirms what everyone else has already figured out, that the recession has spread throughout the economy. It’s not just manufacturing and financial anymore.

In a worrying sign, the effects of the downturn appear to have spread beyond manufacturing and financial services. Activity in a “wide range” of nonfinancial services fell noticeably amid “widespread” job cuts, the Fed said.

“With rising layoffs and hiring freezes, unemployment has risen in all areas, reducing or eliminating upward wage pressures,” the Fed said.

Even typically recession-proof sector like health care are feeling the squeeze. “Providers of health-care services reported falling patient volumes, which were attributed in part to a drop in elective procedures in the Richmond, Minneapolis, and San Francisco Districts,” according to the Beige Book.

I had heard anecdotal accounts from friends with connections to the health care industry that their business was off. I tended to discount it on the premise that the average American with health insurance was hooked on doctors. Guess I was dead wrong on that one. If people have truly quit running to the doctor’s office at the first sign of a sniffle, there may be hope after all.

Overall though, it looks like one more sign that my prediction for a nice second half recovery is shaky.

more: here (WSJ) and here (full report)

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