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Economy chugging along despite shutdown

By Mark Hamrick · Bankrate.com
Wednesday, October 16, 2013
Posted: 2 pm ET

Even with the problems in Washington, the economy appeared to keep moving ahead over the past month, according to the Federal Reserve's Beige Book. But the federal budget stalemate didn't go unnoticed by employers across the country.

The Fed's latest economic survey finds that growth continued at a "modest to moderate pace" over the past month or so.

It also notes "modest" job growth. The employment assessment is getting added attention since the Labor Department report due at the beginning of this month was not issued because of the partial government shutdown, which began Oct. 1.

Briefing.com chief economist Jeffrey Rosen says the report helps fill in some gaps. "Since very little hard economic data from September has been released due to the government shutdown, the October Beige Book took on some added importance."

Even so, he says it doesn't suggest recent trends have changed much, saying the report suggests "more of the same."

"The economy, unfortunately, continues to travel on a below potential trend," Rosen says.

In the Beige Book, prepared through Oct. 7, contacts across the country were "cautiously optimistic" about the economic outlook, but many cited "an increase in uncertainty" because of the shutdown and debt ceiling debate.

On the job market alone, the report says "several  Districts reported that contacts were cautious to expand payrolls." They cited "uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally."

In a note, John Canally, chief economist for LPL Financial, wrote that the Beige Book "mentioned the government shutdown 18 times, and the word 'uncertainty' was used 19 times, the highest count of this word since March '13." Canally says "the U.S. economy could accelerate into year-end once the shutdown and debt ceiling debacle fades." Canally also believes the tone of the report is little changed from before.

The Beige Book is prepared for the late-October Fed meeting. At the last meeting in mid-September, the Federal Open Market Committee announced it would continue $85 billion in monthly asset purchases aimed at bolstering the economy. It remains to be seen how much economic damage was caused by the shutdown and feared U.S. default.

Follow me on Twitter: @hamrickisms.

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