Fed report: Economy improves, but hiring outlook in Western states is grim

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The Federal Reserve’s new report on U.S. economic activity in December and early January showed more signs of improvement across much of the nation, including in the Western states.

But if you’re out of work in the West the Fed’s report, released Wednesday, won’t provide any solace: Many employers in the region expect to do little if any hiring in 2010, even if sales rise.

Here are some of the highlights from the so-called beige book report’s chapter on the Western region, which encompasses California as well as Alaska, Arizona, Hawaii, Idaho, Nevada, Oregon, Utah and Washington:

--- Consumers have been spending again, but carefully: “Retail sales improved modestly but remained somewhat weak on net” in the West, the Fed said. “Discount chains and traditional department stores alike reported that holiday season sales were up slightly compared with 2008, although contacts in general cautioned that sales were still well below the levels recorded in 2007 and prior years.

“Consumers continued to emphasize necessities and lower-priced options for many types of consumer goods. However, further demand improvements were noted for some nonessential and higher-priced items, including furniture and household appliances.”

--- Price discounts still abound, including for services: “Substantial discounting continued to hold down final prices for a variety of retail items, and persistently weak demand further reduced the prices for various services, notably lodging and professional services.”

--- Labor is a buyer’s market, and likely to stay that way: “Upward wage pressures were largely absent, as compensation gains were held down by high unemployment and limited hiring in most sectors and regions,” the Fed said. “The majority of contacts expect that the pace of productivity improvements achieved in their respective industries over the past year will continue in 2010; they therefore expect hiring to remain subdued for a prolonged period, even if product demand improves.”

--- Tourism picks up for some, but not Southern California: “Travel and tourism activity in the district was mixed: Contacts in Southern California and Seattle noted that occupancy rates were down, while contacts in Hawaii and Las Vegas pointed to further improvements in visitor volumes.”

--- Better times for chip makers: “Manufacturers of semiconductors reported further strengthening in demand, with rising sales and balanced inventories noted,” according to the Fed. “Makers of commercial aircraft and parts saw limited new orders, but an existing order backlog combined with a decline in delivery deferrals kept production activity largely stable at moderate levels. By contrast, production activity remained at extremely low levels for metal fabricators, for whom demand has been very weak for an extended period.”

--- Housing stabilizes, but commercial real estate keeps sliding: “Demand for housing appeared to be largely stable, while demand for commercial real estate eroded further,” the Fed said. “After accounting for normal seasonal variation, the pace of home sales was mixed across areas but appeared little changed on net compared with the previous reporting period.” As for commercial property, the report found “vacancy rates for office and industrial space rising further in many parts of the district.”

-- Tom Petruno