Within the past hour, the Federal Reserve has issued its Beige Book summary of economic activity across the country. Essentially, the central bank's issuance opined that the domestic economy was growing modestly, underpinned by improvements in housing demand and increasing auto sales. This growth was taking hold even as the labor market was showing little aggregate change.

Specifically, the Beige Book noted that consumer spending was flat to slightly higher, while conditions in the manufacturing arena were “somewhat improved.”  The Beige Book seemed to suggest that the Fed's recent adoption of a third round of quantitative easing was timely, as growth was slow enough, on its own, to probably keep the labor market from improving decisively in the months to come.

Of course, we did see a sharp reduction in the unemployment rate for September in a government report issued last week, with that metric falling from 8.1% in August to 7.8% last month. However, payroll growth slowed, with the nation creating just 114,000 new jobs last month. That was less than the payroll gains in July and August, which had been revised upward, and was little more than half the level needed, we think, to measurably bring down the jobless rate over time.

As to the various regions, most of the 12 Fed Districts reported increases in real estate demand, with sales of existing homes rising in the past month. Residential construction was described as rising in most Districts, but office markets showed signs of softening in the northeastern Districts of Boston, New York, and Philadelphia.

In truth, there has been improvement in the economy in recent weeks. To wit, we saw signs of strengthening in both manufacturing and non-manufacturing in September, while total auto sales have been routinely surpassing expectations during most months. Also, as noted, the housing market has been firming up, albeit from very depressed levels following a half decade in which building and overall real estate activity had plummeted from the unsustainably high rates reached during the middle of the last decade.

Still, the report noted that many companies have been reluctant to invest in the vague promise of better rates of business expansion going forward. Thus, shipments of nondefense capital equipment generally fell in August.

Finally, business and consumers are logically worried about the fast-approaching ``fiscal cliff'' of a possible $600 billion in U.S. government spending cuts and tax increases that are set to kick in by yearend unless Congress modifies its mandates. 

Overall, the report was about as expected, as the nation moves further into its fourth year of a pedestrian economic recovery. There is aggregate improvement under way over here, in contrast to Europe, just not a vigorous pace of improvement.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.