By Yasin Ebrahim
U.S. economic growth in recent weeks has contracted sharply and abruptly across all areas and more job cuts were expected in the coming weeks, a Federal Reserve survey showed.
As expected, the central bank’s Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through April 6, flagged the coronavirus-led hit to the economy and signaled more pain ahead, particularly in the labor market.
"Economic activity contracted sharply and abruptly across all regions in the United States as a result of the COVID-19 pandemic," the report showed, with leisure and hospitality and retail among the hardest-hit industries due to social distancing measures and mandated closures.
"Employment declined in all districts, steeply in many cases, as the COVID-19 pandemic affected firms in many sectors," according to the report. "Employment cuts were most severe in the retail and leisure and hospitality sectors, where most districts reported widespread mandatory closures and steep falloffs in demand."
Underscoring the potential of a further downturn in the labor market, the report noted the near-term outlook was for more job cuts in the coming months.
With swathes of the economy in lockdown, the pace of inflation unsurprisingly slowed, with districts reporting either slowing price growth, flat prices, or modest to moderate declines in prices on balance, though there were signs of rising prices growth in some essential services.
"Four Districts also reported further declines in energy prices. In contrast, supply chain disruptions and shifts in the composition of demand led to significant price increases for some essential services—such as freight—and some agricultural commodities and consumer goods. While expectations concerning agriculture prices were mixed, the outlook calls for further downward pressure on prices on average," the report highlighted.
There was, however, a sliver of optimism on tourism from Boston.
"One tourism contact reported that coastal communities that rely on seasonal business are cautiously optimistic about a snap-back in visitors who are driving-distance away soon after advisories are lifted, reflecting pent-up demand from cancellation of planned vacations throughout the spring."
Looking ahead, The Fed warned that contacts generally expected economic conditions to "worsen further in coming months,."
"Consequently, many planned to conserve cash by reducing capital spending and cutting staffing levels in the months ahead. Weakening demand across industries generally resulted in less upward pressure on costs and prices."
