The country’s economic picture has darkened further as Americans hunkered down heading into the holidays, forcing retailers to ring up fewer sales and factories to cut back production.
The Federal Reserve‘s new snapshot of business conditions nationwide, released Wednesday, suggested the economy was sinking deeper into recession.
“Economic activity weakened across all Federal Reserve districts,” the report concluded.
The Fed didn’t use the word “recession,” but just two days earlier the National Bureau of Economic Research declared what many Americans already knew in their bones: that the country had been slogging through one since last December.
To cushion the fallout, Federal Reserve Chairman Ben S. Bernanke said Monday that the central bank is prepared to lower its key interest rate and to explore other ways to revive economic activity. Many economists predict the Fed will cut its rate — now near a historic low of 1 percent — at its Dec. 16 meeting.
“We’ve seen things fall off a cliff,” said economist Ken Mayland, president of ClearView Economics. “Everybody — consumers and businesses — are just freezing.”
With jobs vanishing, shoppers cut back, causing retail sales to be “weak” or “down” in most of the Fed’s 12 regions.
“Retailers were preparing for a relatively slow holiday sales season,” the Fed report said.
ShopperTrak RCT Corp., a research company that tracks total retail sales for more than 50,000 outlets, released more data Wednesday. It showed that the better-than-expected sales boost on Friday, the traditional opening for the holiday shopping season at stores, fizzled quickly during the rest of the weekend — resulting in a mixed start to the season.
Besides retail sales, auto sales were down sharply in most Fed regions. Car buyers in many areas had difficulty obtaining financing, a direct result of the credit crisis, the report said.
At factories, “manufacturing activity declined noticeably” since the Fed’s last report in mid-October. Similarly, activity in the services sector contracted in most Fed regions.
In a separate report Wednesday, the U.S. service sector, which includes hotels, retailers and other industries, saw activity shrink more than expected in November. The Institute for Supply Management, a trade group of purchasing executives, said readings for new orders, employment and prices all reached the lowest levels on records dating back to 1997.
The Fed’s survey suggested that businesses have little inclination to hire.
Employers in the Fed regions of Boston, Richmond, Chicago and Dallas reported that demand for temporary workers dropped. Employers in the regions of Boston and Cleveland also reported that seasonal hiring had been scaled back at retail stores.
The nation’s unemployment rate jumped in October to 6.5 percent, a 14-year high. So far 1.2 million jobs have vanished this year and the losses will get worse. Many economists are predicting the jobless rate will climb to 6.8 percent for November and employers will chop another 320,000 jobs. The government releases the new employment report on Friday.