The U.S. economy took a distinct turn for the worse in recent weeks, with labor markets weakening, consumer spending slumping and price pressures easing, a Federal Reserve report showed on Wednesday, according to Reuters.

The Fed`s Beige Book, an anecdotal summary of economic conditions based on the central bank`s extensive business contacts across the country, portrayed declines in most areas of the economy.

"Overall economic activity weakened across all Federal Reserve Districts since the last report," the Fed said.

Stocks fell as the report added to anxiety about the economic outlook but later rebounded near the closing bell.

Labor markets softened as firms in many districts reported accelerating layoffs, while wage pressures were largely subdued, the Fed said.

Consumer spending declined, with retail sales narrowing and vehicle sales falling off sharply in most regions of the country.

The report was based on data collected before Nov. 24.

Earlier this week, a panel of experts formally declared the U.S. economy in recession since December 2007.

The Fed is expected to its lower benchmark interest rate target by a half-percentage point to 0.5 percent at its next scheduled policy meeting Dec. 15-16.

Some analysts expect the Fed could bring rates down to zero by its following meeting at the end of January as it seeks reverse the economic contraction linked to the collapse of housing markets and a jump in home loan defaults.

Central banks in the euro zone and elsewhere are expected to cut borrowing costs aggressively in coming days as fears of a global recession took hold.

Adding to the gloomy picture, the Beige Book described weak housing markets characterized by reduced selling prices in many regions. Sales were down in most districts, the Fed said.

Credit conditions remained tight and business and consumer lending activity slowed in most districts, the U.S. central bank said.

Manufacturing activity had declined "noticeably" since the last Beige Book in October, the Fed said.

Inflation pressures had largely evaporated with declines in some retail prices and falling prices for energy and many raw materials, the report said.

Comments gathered by the Fed suggested businesses across the country are feeling a high degree of pain.

A Boston contact described the credit squeeze as "murderous." A housing products manufacturer in the Philadelphia region called the industry "at a standstill."

A West Virginia car dealer said he had gone from selling an average of 250 cars a month to six in November. Corporate meetings were being canceled in Southern California and tourist visits and spending have dropped sharply in Hawaii, the report said. (Additional reporting by Emily Kaiser; Editing by Kenneth Barry)