WASHINGTON
The economic recovery gained traction in late fall as shoppers spent a bit more and factories bumped up production. That assessment yesterday by the Federal Reserve marked its most upbeat view since the economy tumbled into recession two years ago.
The Fed's new snapshot of business barometers nationwide found that conditions have generally improved since the last report in late October.
Eight of the Fed's 12 regions surveyed reported some pickup in activity or improved conditions, the Fed said. Those regions were: Boston, New York, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.
The four other regions -- Philadelphia, Cleveland, Richmond and Atlanta -- described conditions as little changed or mixed. North Carolina is part of the Richmond region.
The new report adds to evidence that the economy is rebounding after the worst recession since the 1930s.
The main challenge for Fed Chairman Ben Bernanke, who will be on Capitol Hill today seeking confirmation for a second term, is to sustain the rebound, especially after the benefits of government support fade next year.
To that end, the Fed is expected to hold a key bank lending rate at a record low near zero when its meets Dec. 15-16. Economists say the Fed will keep rates at super-low levels well into next year.
With yesterday's survey also finding that inflation remains under control, the Fed has leeway to hold rates at record-lows. The central bank hopes that will entice people and businesses to step up spending, which would bolster the economy.
Although the jobs market remains lousy, the Fed survey found some scattered signs of improvement in some markets. In the Boston region, some businesses were starting to hire and reverse pay cuts or wage freezes implemented earlier in the year. The St. Louis region noted that the service sector recently started to expand.
Still, holiday hiring expectations nationwide were mixed, the Fed report said. And most private economists predict that even as the pace of massive job losses slows, the nation's unemployment rate -- now at a 26-year high of 10.2 percent -- will continue to climb into next year. Some predict it will rise as high as 11 percent by the middle of 2010 before slowly drifting down.
The Fed warned last week that it could take five or six years for the job market to return to normal.
That's why Bernanke and others think that consumers -- while appearing to hold up fairly well now to all the negative stresses -- may turn more cautious in the months ahead, restraining the recovery.
Consumers in late November spent more, with general merchandise and auto sales improving across much of the country, the Fed report said. Unsure of customer demand, most merchants were keeping stocks fairly lean during the holiday season. Yet some retailers suggested that they have recently become more optimistic about the holiday sales outlook.
The Fed survey also found that manufacturing conditions generally showed some improvements.
Many manufacturers said they were "optimistic about the near-term outlook." But makers of construction-related materials were still pessimistic, mostly because of expectations that problems in the commercial real-estate industry will be prolonged.
By contrast, the housing market -- sales and construction activity -- improved across much of the country, according to the Fed survey.
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