Pessimism continues as cutbacks increase

WASHINGTON (AP) — After a dismal start to 2009, business people see more pain ahead, expecting no improvement in economic conditions till late this year at the earliest.

Their pessimism was evident in the Federal Reserve’s latest snapshot of business activity nationwide. It showed sharp cutbacks affecting both blue-collar jobs that once churned out construction equipment and white-collar professionals such as business consultants and accountants.

From factories in Cleveland to high-tech firms in Texas and California, the Fed’s beige book reported widespread production declines.

“National economic conditions deteriorated further,” the Fed’s survey concluded. “The deterioration was broadbased, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions.”

Looking ahead, business people rated the prospects “for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010.”

The survey summarizes information from businesses and others supplied to the Fed’s 12 regional banks. The information — most of it anecdotal — was collected on or before Feb. 23. It’s used by the Fed to get a better idea of what’s occurring at the ground level of the economy and will figure into discussions among Fed Chairman Ben Bernanke and his colleagues when they meet next on March 17-18.

The Fed is widely expected to hold its key interest rate at a record low at that meeting as well as through the rest of this year to help revive the economy, which has been stuck in a recession since December 2007. The Fed also has said it will consider expanding existing relief programs or come up with new ones to extinguish the worst financial crisis since the 1930s.

Still, most economists believe the recession will drag on for most of this year even after the enactment of President Barack Obama’s $787 billion stimulus package of boosted federal spending and tax cuts designed to revive limp consumer spending and boost factory production. Bernanke told Congress on Tuesday that the impact of the stimulus package is subject to “considerable uncertainty” given the current economic climate.

The nation’s unemployment rate in January jumped to 7.6 percent, the highest in more than 16 years, and the number of newly laid-off people signing up for unemployment benefits has been climbing in recent weeks. The government will release February jobs data on Friday and many economists expect the unemployment rate rose to 7.9 percent while employers cut nearly 650,000 jobs.

The economy also has been battered by a collapse in the housing market and a lockup in lending that has made it difficult, and more expensive, for people to secure financing for homes, cars and household appliances.