By Yasin Ebrahim
Investing.com – Economic activity declined across the U.S. in recent weeks and the road to recovery in the labor market could take longer as generous unemployment benefits and concerns about infections are keeping employees at home, a Federal Reserve survey showed.
The central bank’s Beige Book economic report, based on anecdotal information collected by the Fed’s 12 reserve banks through May 18, underscored the impact of the pandemic on the economy as consumer spending and employment continued to decline.
"Economic activity declined in all districts – falling sharply in most – reflecting disruptions associated with the Covid-19 pandemic," the report showed. "Consumer spending fell further as mandated closures of retail establishments remained largely in place during most of the survey period. Declines were especially severe in the leisure and hospitality sector, with very little activity at travel and tourism businesses."
In a blow to hopes that the labor market may bounce back sooner rather than later, contacts cited challenges in "bringing employees back to work, including workers' health concerns, limited access to childcare, and generous unemployment insurance benefits."
The disinflationary pressure, meanwhile, showed no sign of abating amid weak demand pressuring selling prices for apparel, hotel rooms, and airfare, though supply chain disruptions and strong demand led to higher prices for some grocery items including meat and fresh fruit.
In New York, the epicenter of the pandemic, the regional economy continued to contract since the last report, though there were "scattered signs of a pickup" in early May, the report showed.
"Businesses reported widespread layoffs and flat to declining wages, but the vast majority of separations were deemed temporary. Prices paid rose slightly, while selling prices edged down. Leisure & hospitality and retail trade have remained the most severely affected. Financial firms reported weaker activity."