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The U.S. economy suffered a deep decline from March through mid-May as a result of the coronavirus pandemic and the subsequent lockdown of the nation, according to the Federal Reserve's Beige Book.
Most of the Fed’s 12 districts reported a sharp decline in economic activity, the central bank said in its region-by-region roundup of anecdotal information known as the Beige Book. The report, prepared by the Federal Reserve Bank of St. Louis, was based on information collected through May 18.
"Economic activity declined in all Districts – falling sharply in most – reflecting disruptions associated with the COVID-19 pandemic," the report said. "Consumer spending fell further as mandated closures of retail establishments remained largely in place during most of the survey period."
Production was notably weak in manufacturing, particularly the auto, aerospace and energey-related plants.
In the two months since the economy locked down to limit the spread of the virus, 38.6 million Americans have lost their jobs, a rate unseen since the Great Depression. Just three months ago, unemployment sat at a half-century low.
Employment continued to fall in all of the districts, with most reporting "steep losses," as social distancing guidelines weighed on businesses. The losses were concentrated in retail and in leisure and hospitality.
Although securing government-backed loans through the Paycheck Protection Program helped some businesses to limit or avoid layoffs -- banks reported a "strong" demand for the aid -- business owners said the extra $600-a-week in unemployment benefits created a challenge in bringing employees back to their job.
"Contacts cited challenges in bringing employees back to work, including workers' health concerns, limited access to childcare, and generous unemployment insurance benefits," the report said. "Overall wage pressures were mixed as some firms cut wages while others implemented temporary wage increases for essential staff or to compete with unemployment insurance."
The districts were also not optimistic about the future and the economy's eventual rebound from the virus outbreak.
"Although many contacts expressed hope that overall activity would pick-up as businesses reopened, the outlook remained highly uncertain and most contacts were pessimistic about the potential pace of recovery," it said.