All signs point to a jobless recovery
The job situation just refuses to right itself. New jobless claims didn't fall as much as expected last week, and the number of people receiving unemployment checks continued to climb. Though the "jobless recovery" notion has become pretty firmly implanted in the American consciousness, the pain associated with it isn't readily acknowledged, and flat incomes – thanks to a flimsy job market – will extend the agony.
At present, we're caught between economic phenomena and the realities of our personal situations. Most economists are ready to proclaim the recession over. Yet, companies aren't hiring yet. Jobless rates will continue to increase for the next year, and consumer spending consequently will remain under pressure. So, any signs of progress toward a turnaround will be small, requiring the height of optimism to notice.
Laid-off employees applying for unemployment benefits fell to 570,000 last week – an improvement, but not of the caliber expected. Meanwhile, those collecting benefits surged by 92,000 to 6.23 million. Since December 2007, a net total of 6.7 million jobs have been lost. And, with a 9.7 percent jobless rate for August, this number could go higher. By next summer, according to Obama economic advisor Christina Romer, the jobless rate could hit 10.3 percent.
A positive sign is that claims are well off the peak of 674,000 reached in the fist week of April. But, the results are still above the 350,000 threshold that many economists believe to be indicative of a healthy labor market. The four-week initial jobless claims average was 571,250 last week, according to the Department of Labor, up from 567,250 the week before.
Consumer spending remains the key to a recovery, as it accounts for 70 percent of economic activity in the United States. Yet, back-to-school sales have been pretty grim. In established stores, sales fell 2.1 percent from August 2008 to August 2009, based on data from 31 retailers. Target (TGT), Costco (COST) and BJ's Wholesale Club (BJ) beat analyst expectations despite falling year-over-year, but upscale retail outlets had a weak month.
So, the economy confirms for us once again that there's no easy way out. Alternatives to full-time employment will take time to have an effect on consumer spending, but eventually, we'll see change. Look for the oppressive heat of next summer to bring the upside of full job boards.