Oil Price Drops Help Some, Hurt Others in US Economy

A plunge in energy prices helped many Americans spend more freely in November and December, but it also weighed on those with livelihoods tied to the oil industry, the Federal Reserve said on Wednesday.

 

All told, the Fed's monthly Beige Book report on business activity showed the economy continued to expand, according to anecdotes collected from contacts nationwide on or before Jan. 5.

 

The report showed "most districts reporting a 'modest' or 'moderate' pace of growth," with workers in many professions still struggling to get bigger pay increases.

 

Compiled by the Federal Reserve Bank of San Francisco, the report showed some consumers were getting a boost from lower gasoline prices, which helped holiday sales in the Chicago district and was leading people to buy bigger cars in the Atlanta district.

 

At the same time, growth in business activity in the Dallas district slowed, with several contacts expressing "concern about the effect of lower oil prices," it said.

 

Texas is a major player in America's oil industry, which has grown rapidly in recent years thanks to breakthroughs in drilling technologies. Oil prices have declined sharply since June, reflecting in part slowing global economic growth and increased domestic production in the United States.

 

While output of energy-related products and services, such as oil well drilling, increased, "overall demand for energy-related products and services weakened somewhat," the report said.

 

In the Dallas district, a few energy firms reported hiring freezes and layoffs and demand for oilfield services fell.

 

And across the economy, workers made little progress in terms of wage increases, underscoring a key area of unfinished business in America's recovery from the 2007-09 recession. "Significant" wage pressure was largely limited to workers with particular technical skills, the Fed said.