WASHINGTON: The Midwest is starting to see a comeback in manufacturing and technology. Home sales are rising in parts of the Northeast. But states like Florida, Nevada and California, still suffering from the housing bust, remain depressed.
The economy's tentative recovery is occurring in pockets around the country, with some states and cities starting to rebound while neighboring areas still struggle, two government reports showed Wednesday.
They showed improving job markets in some Midwestern states, such as Indiana and Ohio. But other states, such as Rhode Island, posted new record-high joblessness.
In the Fed's latest survey of businesses nationwide, all but two of 12 regions showed at least some signs of improvement. Only the Atlanta and St. Louis regions reported weaker economic activity.
The survey found many parts of the country either stabilized or improved modestly over the past six weeks. The Boston, Cleveland and Richmond, Va., regions reported growing home sales, though the gains came from depressed levels.
But the picture is still far bleaker in places hit hardest by the collapse of the housing market. Florida reported a record-high jobless rate of 11 percent, according to the Labor Department. Nevada's climbed to 13.3 percent, also a record.
Michigan, home of the battered American auto industry, claimed the highest jobless rate in the country — 15.3 percent.
While Americans still hold tight to their wallets, pickups in housing and manufacturing activity are leading the budding recovery in most of the country, according to Fed's survey.
Economists warn that the improvements could fizzle, though, after government help is removed. For example, gains in the housing market could be threatened if a tax credit for first-time homebuyers is allowed to expire Nov. 30.
"The main story here is the economy is starting to turn around," said Robert Dye, senior economist at PNC Financial Services Group. "This is not a consumer-led recovery. This is very much a stimulus-led recovery. And it begs the question: What happens when the government supports are withdrawn?"
Factories have been increasing production as businesses restock depleted inventories. Part of that restocking was due to the Cash for Clunkers program this summer, which caused a brief burst in car sales.
By contrast, the Fed said the weakest link in the recovery is commercial real estate, with vacancies high across the country and businesses unable to get credit to buy or build commercial space.
The nation's unemployment rate climbed to a 26-year high of 9.8 percent in September, and is expected to top 10 percent this year. Economists predict it will rise as high as 10.5 percent by the middle of next year before slowly drifting down.
The Labor Department report said unemployment rose in 23 states last month. While layoffs have slowed, companies remain reluctant to hire. Forty-three states reported job losses in September, while only seven gained jobs.
The findings of the Fed survey will figure into discussions when Fed Chairman Ben Bernanke and his colleagues meet in early November. The Fed is expected to keep interest rates at record lows into next year to help foster the recovery.
Many analysts believe the economy started to grow again in the third quarter. Results will be out next week, and a return to growth would be a turning point for the economy after a full year of contraction.
The Fed survey, known as the Beige Book, offers anecdotal snapshots of economic and financial activity nationwide from businesses which are on the front lines of the economy. Information for the report was collected before Oct. 13.
The tone "was more tentatively positive," said economist Jennifer Lee at BMO Capital Markets. "Not super-duper-jumping-up-and-down-with-great-excitement positive, but slightly more optimistic than seen in recent reports."
Among the findings: Dallas said there were slight improvements in residential real estate and at staffing firms. New York saw gains in manufacturing and retail. Philadelphia, Cleveland and San Francisco cited small pickups in manufacturing. Kansas City noted improvements at technology companies, while Richmond posted revenue gains at service companies.
By region, the West had the highest unemployment rate, 10.6 percent. The South's was 9.3 percent, and the Northeast had the lowest, 9 percent. The Midwest, at 9.8 percent, was the only region where joblessness fell from the month before.
Indiana, for example, has benefited from a rebound in the auto sector and a healthy medical device industry, and unemployment has dropped two months in a row, said Robert Guell, an economics professor at Indiana State University in Terre Haute.
He's no longer skeptical that the improvements have been a fluke. "It does look green shoot-like," he said.
The state is home to many auto parts and assembly plants, which are ramping up production as General Motors and Chrysler replenish inventories depleted by the popular clunkers program.
In Ohio, the jobless rate fell to 10.1 percent, from 10.8 percent in August and 11.2 percent in July.
Lucia Dunn, an economics professor at Ohio State University, said the state has benefited from growth in financial services and technology companies. Recruiters from a JPMorgan Chase & Co. regional office frequently contact her seeking candidates for economist and statistician jobs.
"Most people here feel that the worst is over," Dunn said.