Fed Report: 2020 Closes Out With Slight Economic Uptick

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The U.S. economy posted slight gains in the pandemic year of 2020, after closing the books on what was one of the most dismal economic fallouts in history, according to the Federal Reserve’s Beige Book report on Wednesday (Jan. 13).

Published eight times a year, the report is a compilation of anecdotal information on current economic conditions from each Federal Reserve Bank. This latest report shows how the impact of COVID-19 varied by region and industry as the infection rate escalated, which dashed hopes brought by the arrival of the vaccine.

“Although the prospect of COVID-19 vaccines has bolstered business optimism for 2021 growth, this has been tempered by concern over the recent virus resurgence and the implications for near-term business conditions,” according to the report.

Most of the Fed’s 12 districts reported a modest increase in economic activity, with two districts reporting no change and two reporting declines. Almost all districts indicated a slight boost in prices since last month’s report, with building materials, steel products, and shipping services going up the most. Low real estate inventories combined with rising construction costs caused the continued rise of housing market prices. Commercial real estate remained flat.

Retail merchants in most districts reported an uptick in revenue compared to the previous year, but the travel and hospitality industry was still way off compared to pre-pandemic levels. Companies in the software and IT services sector reported some improvement. Most firms responding to the Beige Book survey reported they were optimistic for 2021, but were more guarded concerning the first half of the year.

Employment levels dropped in some districts and rose in others, with labor demand strongest in the manufacturing, construction and transportation sectors. Some employers in those industry verticals reported needing help but said they were unable to attract qualified workers for entry-level and on-site positions.

Last month, a survey of 48 economists showed that 73 percent forecasted that the economy would start seeing a return to pre-pandemic levels by late 2021. Several months ago, 38 percent of responding economists didn’t expect a recovery before 2022.

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