Federal Reserve ends meeting without major moves

— -- Economic reports took a slightly more positive turn Tuesday, with the Federal Reserve modestly upgrading its outlook and an index of small-business optimism reaching its highest level since February.

In a statement after its meeting, the Fed's policymaking committee said the economy "has been expanding moderately" and noted "some improvement" in the labor market.

Early last month, by contrast, the Fed cited "continuing weakness" in the job market. The Labor Department reported that employers added 120,000 jobs last month and unemployment fell to 8.6% from 9%.

The Fed noted the jobless rate "remains elevated" and the housing sector is still "depressed," though consumer spending is rising. The European debt crisis, meanwhile, continues "to pose significant downside risks" to the outlook.

The central bank took no further action to stimulate a lackluster recovery that has picked up somewhat in recent weeks. However, policymakers said they would continue an initiative announced in September to shift the Fed's portfolio to more longer-term Treasuries by June in an effort to further reduce long-term interest rates.

Policymakers agreed to keep a key short-term interest rate near zero at least through mid-2013. Chicago Fed chief Charles Evans dissented, arguing the Fed should do more to stimulate growth. As early as January, the Fed is expected to announce it will set economic targets that must be reached before interest rates are raised.

Separately, an index of small-business attitudes rose in November for the third-consecutive month, according to the National Federation of Independent Business. "People feel like they're out of intensive care but are still a little sick," says NFIB chief economist Bill Dunkelberg.

Most encouraging: 7% more small businesses plan to increase payrolls the next three months than cut them, a jump of 4 percentage points vs. October and the strongest showing in more than three years.

"You're starting to get a little glimmer of something turning," says Diane Swonk, chief economist of Mesirow Financial.

Diversified Graphics, a Salisbury, N.C., printer, recently purchased a $100,000 machine to double the speed of its mail addressing, says President Frank Goodnight. Utah Metal Works, a recycler, plans to buy a $1 million compactor and hire two employees to run it. High metal prices boosted sales 22% this year, says CEO Mark Lewon.