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Beige Book finds deterioration in N.E.

By Robert Gavin
Globe staff / December 4, 2008
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The New England economy deteriorated in recent months, with companies reporting slumping sales, increasing layoffs, and uncertainty about the future, according to a Federal Reserve survey of businesses.

The survey, known as the Beige Book, collects anecdotal information from businesses to help assess economic conditions in advance of the Fed's rate-setting meetings. The Fed is widely expected to cut its benchmark rate to a record low 0.5 percent from 1 percent when policy makers meet Dec. 15-16.

In New England, the Fed survey found business executives to be cautious at best, with many gloomy about near-term prospects. Manufacturers, many reporting double-digit sales declines, are laying off or furloughing workers, firing temporary workers, and imposing pay cuts, according to the survey. Retailers have frozen hiring and scaled back seasonal hiring during the holidays. Staffing firms, which place temporary and permanent workers, were described as gloomy.

One staffing executive told the Fed: "Everybody's spooked. There's no hiring going on at all."

The mood among New England commercial real estate firms is "downbeat" as rents have fallen 10 to 15 percent from their highs early this year, and office vacancy rates in Boston and the suburbs climbed to double-digits, according to the Beige Book. Executives expect layoffs in financial service and other firms to increase vacancy rates further.

Some residential real estate markets saw sales recently rise from a year ago, but prices have plunged sharply. One realtor expected the housing downturn to last into next year.

Technology firms reported mixed sales, ranging from year-over-year declines of 10 percent to gains of nearly 25 percent. Some tech firms are planning layoffs while others plan to expand.

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