WASHINGTON (MNI) – The following is the second and final part of
the text of the Federal Reserve’s Beige Book survey First District
summary, published Wednesday:

Staffing Services

New England staffing respondents report that the upward trends of
the second half of 2009 and the beginning months of 2010 have continued;
however, a few contacts lament that overall activity still remains below
expectations. Revenues have risen year-over-year, ranging from slightly
better to up nearly 50 percent. The number of conversions from
temporary to permanent staff is rising and direct-hire placements are
beginning to pick up. Labor demand from the pharmaceutical, biomedical,
aerospace, and semi-conductor industries is steady. There is renewed
activity in the legal sector, with increased labor demand for
paralegals, business support personnel, and attorneys. On the other
hand, the construction, architecture, civil engineering, marketing, and
accounting sectors remain slow.

In terms of labor supply, the skills of job seekers often do not
align with the needs of employers; one contact notes that hundreds of
college graduates are looking for work but available positions often
require more experience. Other contacts indicate that highly skilled
candidates are receiving multiple offers; clients, in turn, are showing
more willingness to pay higher rates. In addition, turnover has recently
increased, as those with jobs seem somewhat less reticent to give them
up. Looking forward, First District staffing contacts largely express
increased optimism and predict gradual improvement through 2010.

Commercial Real Estate

According to contacts around New England, commercial leasing
activity is at least flat, and in some cases noticeably improved,
compared to the last report. A Rhode Island contact notes a significant
increase in leasing activity in recent weeks, driven by a backlog of
postponed renewals. He characterizes tenants as wanting to make deals
while they still have significant bargaining power; furthermore, he
hears word that some firms are beginning to consider new hiring and
expansion of operations. A Hartford contact describes leasing activity
as flat in his metropolitan area and says this is consistent with local
fundamentals, such as limited hiring activity and persistent retail
vacancies downtown; nonetheless, he notes modest improvements in
sentiment among both business professionals and consumers. Boston
contacts report an uptick in lease deal volume; one was pleased to see a
recent lease deal that will absorb a large portion of space in the
Hancock tower, but otherwise had little good news to report. Across the
region, rental rates and vacancy were largely unchanged in recent weeks.
With the exception of industrial properties in Rhode Island, commercial
property sales activity was slow across markets in the region. Contacts
in Providence and Boston note that debt default rates for commercial
properties remain significant, and defaults are perceived to be on the
rise in Boston’s suburban corridors. The good news, however, is that
properties and/or debt are changing hands as new equity is increasingly
willing to invest in commercial real estate. A commercial real estate
lender in Boston confirmed the influx of equity cash as a welcome
development after at least 18 months of investor skittishness. The same
lender is seeing many worthy lending opportunities in greater Boston and
reports facing increasingly stiff competition from other regional
lenders to lower rates and relax loan terms.

The outlook is mixed among respondents around the region. The
Providence contact is more optimistic about both hiring and leasing over
the next six to 12 months than a Boston contact, who maintains his
prediction that rents have further to fall. In Hartford, the outlook is
largely unchanged, and a Boston banking contact remains guardedly
optimistic. However, nearly all contacts point to the recent troubles
in Europe as a new source of uncertainty on the horizon.

Residential Real Estate

Residential real estate markets in New England experienced large
gains in April compared to a year earlier; contacts attribute much of
the improvement to the impending expiration of the homebuyer tax
credits. Home sales increased sharply year-over-year across the region,
ranging from a 26 percent increase in Rhode Island to a 63 percent
increase in Maine. Condo sales increased between 39 percent and 64
percent in April compared to a year ago. The median price of homes also
showed modest improvement in all markets. The median price of condos in
the region also increased modestly year-over-year in April, except in
Rhode Island, where it fell 15 percent.

April 30 was the deadline to sign a contract on a home in order to
be eligible for the homebuyer tax credits; because June 30 is the
associated deadline to close on the home and contract-signings continued
through April, contacts expect sales numbers to remain strong in May and
June. There is no consensus among respondents about how markets will
perform after June, although some cite anecdotal evidence of continued
activity after April 30 and most think that low interest rates and
fairly low prices will continue to make the market attractive for
prospective buyers.

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** Market News International Washington Bureau: 202-371-2121 **

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