Economic growth in the United States picked up over the last two months and hiring showed signs of a "modest increase," the Federal Reserve said in a report that ran counter to a growing sense of economic gloom.
"Overall economic activity expanded at a moderate pace," the central bank said on Wednesday in its latest "Beige Book" summary of business activity covering a period between early April and late May.
The Fed's previous Beige Book assessment of the economy, released on April 11, had painted growth in a more timid light.
The central bank also described hiring as steady or modestly increasing, in contrast with a government report last week that showed hiring slowed last month for a fourth straight month.
"The economy is not deteriorating as rapidly as last Friday's payrolls report suggests," said Stephen Stanley, an economist at Pierpont Securities in Stamford, Connecticut.
The Labor Department said on Friday that employers added just 69,000 people to payrolls last month, the weakest increase in a year. The data fueled concerns the economy was cooling, although many economists think part of the labor market slowdown was a temporary payback for mild weather that boosted hiring over the winter.
The Beige Book, prepared this time by the Dallas Federal Reserve Bank based on information collected through May 25, is based on anecdotal reports from business people from coast to coast and will be used by Fed policymakers at their next meeting on June 19-20.
A number of Fed officials indicated over the last few days that their view of the outlook had not shifted enough to warrant a further easing of monetary policy. Congressional testimony by Fed Chairman Ben Bernanke on Thursday will give a clearer sense of whether the central bank's policy panel will hold off taking any new steps.
"The unexpected bullish assessment in this report will likely dampen the enthusiasm for policy easing among some committee members," said Millan Mulraine, a macro strategist at TD Securities in New York.
Separately, the Labor Department said business productivity fell more than expected in the first quarter as companies stepped up hiring sharply but only modestly expanded output.
Non-farm productivity slipped at a 0.9 percent annual rate. The decline was both sharper than the 0.5 percent initially reported and the 0.7 percent drop economists expected. It marked a turnabout from a 1.2 percent fourth-quarter gain.
Employers slashed payrolls during the 2007-09 recession, helping fuel a spike in productivity. But the increase faded last year and productivity, which measures how much any worker can produce in an hour, has declined in three of the last five quarters. Over the past four quarters, productivity has risen just 0.4 percent, the smallest gain since early 2009.