WASHINGTON (Dow Jones)--U.S. economic conditions continued to improve slightly at the end of 2009, but weak labor and real estate markets are keeping activity low, the Federal Reserve said in a report Wednesday.
In its latest beige book report, the Fed said 10 districts reported some increased activity or improvement in economic conditions, while the remaining two--Philadelphia and Richmond--reported mixed conditions.
The beige book is a summary of economic activity prepared for use at the central bank's next policy-setting meeting Jan. 26-27. The latest report, prepared by the Federal Reserve Bank of Philadelphia, examined economic conditions across the Fed's 12 districts from Nov. 21 through Jan. 4.
"Most districts reported that consumer spending in the recent 2009 holiday season was slightly greater than in 2008, but still far below 2007 levels," the report said.
There were some exceptions, however. New York City's Broadway theaters reported weaker attendance this past holiday season than in 2008, the beige book said.
Retailers in the Philadelphia and San Francisco districts noted that the small gains in 2009 did not represent a significant shift in trend since 2008 sales were so low compared with 2007.
Consumer spending, a key growth engine for the U.S. economy, started to recover slightly in the second part of 2009, helped by a massive government stimulus.
Emerging from its worst recession in decades, the U.S. economy expanded by an annual 2.2% in the third quarter of last year and is expected to grow at a stronger pace in the final three months of 2009. But a fading stimulus is expected to keep unemployment high and inflation subdued this year, conditions that would prompt the Fed to keep interest rates at a record low near zero.
Although some hiring was reported in a few districts, labor market conditions remained weak, with just some modest wage increases appearing in a few regions, the central bank report said.
The U.S. economy shed a higher than expected 85,000 jobs in December and the unemployment rate remained at a lofty 10%, data showed last week. The jobless rate would have been even higher if more people had been looking for work instead of leaving the work force altogether.
Price pressures remained subdued in nearly all districts, though increases in metals prices were reported, the beige book said.
"The lack of price pressures are expected to keep the Fed focused on supporting the nascent recovery by maintaining low interest rates for an extended period," said analysts at Caylon Wednesday ahead of the beige book release