Fed regional survey shows no sign of 'double dip'

The Federal Reserve said Wednesday that the U.S. economy maintained its expansion while showing "widespread signs of a deceleration" in mid-July through the end of August, according to a survey by 12 regional Fed banks.

Five regional banks reported "economic growth at a moderate pace" and two pointed to "positive developments or net improvements." The remaining five banks said conditions were mixed or decelerating.

The report underscores the Fed's view that while the recovery from the worst recession in seven decades has cooled, the economy isn't relapsing into a contraction. In a speech last month in Jackson Hole, Wyo., Fed Chairman Ben Bernanke said "the preconditions for a pickup in growth in 2011 appear to remain in place."

In the previous regional report, released July 28, the Fed said "economic activity has continued to increase, on balance." Two Fed districts reported the economy "generally held steady," while two others said the pace of growth "had slowed recently."

The Standard & Poor's 500 index rose 0.6 percent to 1,098.87 after climbing as much as 1.1 percent. The yield on the 10-year Treasury note rose to 2.65 percent.

The report is "a continuation of the view that was discussed at Jackson Hole that the chairman put forth," said John Taylor, an economist at Stanford University and creator of an interest-rate formula used by central banks. "It's not a double dip, it's not another recession within a recession. But it is a major disappointment in terms of a recovery."

The regional survey, known as the "beige book" for the color of its cover, offers anecdotal evidence that will help central bankers determine whether more stimulus is needed to reduce a jobless rate stuck near a 26-year high and protect a recovery from the deepest recession since the 1930s. The policymaking Federal Open Market Committee next meets Sept. 21.

Private employers added 67,000 jobs in August, more than forecast, and the jobless rate rose to 9.6 percent as more people looked for work. Total payrolls, including government agencies, shrank by 54,000, reflecting the dismissal of temporary workers hired to conduct the 2010 census.

"They're clearly making a distinction between slowdown and recession. They do not see recession but they do see slower growth," said Low, who expects the Fed to resume quantitative easing in 2011, based on his forecast for slowing growth.

For now, Fed officials say growth will pick back up in 2011. John Williams, research director of the San Francisco Fed, said Wednesday that his bank expects growth of as much as 4 percent in 2011.