Jobs Picture Brightens, But Economy Awaits Liftoff

job market improvingBy Paul Wiseman and Christopher S. Rugaber


WASHINGTON (AP) -- After years of bad news begetting more bad news, the American economy may finally be building momentum in the other direction.

A flurry of economic reports issued Thursday captured some solid recent gains: Companies are hiring. Factories and department stores are busier. Americans are buying more cars.

And the stock market just ended its best February in 14 years.

But Thursday's reports also showed that a healthier job market hasn't translated into bigger paychecks for workers or a surge in consumer spending. And the progress of the past few months is now threatened by a rise in gasoline prices.

On one hand, analysts say the economy may be on the verge of a "virtuous cycle," in which stronger hiring fuels more consumer spending, which leads to even more hiring and spending.

On the other hand, even months of improvement have yet to demonstrate that the cycle can sustain itself.

"When you get this sort of hodgepodge and not-so-good results, you start to see the true nature of this recovery," said Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness.

A healthier job market hasn't produced bigger paychecks or a surge in consumer spending. The housing market is still weak. A European recession threatens to hold back U.S. growth.

Thursday's reports showed an economy maintaining its growth 2 1/2 years after the official end of the Great Recession: The number of people applying for first-time unemployment benefits fell last week to a four-year low. And automakers, such as Ford and Chrysler, and many retailers, including Target Corp. and Macy's Inc., reported improved sales for February.

At the same time, the government said consumer spending flat-lined in January after adjusting for inflation. Manufacturing activity grew at a slower pace in February as factories received fewer orders and had to pay more for raw materials. And construction spending slipped in January, the first monthly drop since July.

Another worrisome sign is that gas prices are headed toward $4 a gallon.

All that comes even as a strong report this week on consumer confidence helped lift the Dow Jones industrial average past 13,000 for the first time since May 2008. Unemployment has dropped for five straight months. And the economy has generated nearly 2 million jobs over the past year.

Once a virtuous cycle feeds on itself, optimistic consumers spend more, which motivates businesses to hire more. And so on.

That still might happen. But consumers are struggling to sustain their confidence after the housing market collapsed and the resulting recession vaporized $7.8 trillion in household wealth from 2006 through mid-2011.

"The recovery is still bearing the scars of the recession and the crisis that led into it," Snaith said.

Even the Federal Reserve appears baffled by the economy's unpredictability.

Chairman Ben Bernanke told lawmakers this week that the recovery remains "uneven and modest by historical standards." Yet he also acknowledged that the Fed underestimated the job market's strength, which has led to sharp declines in unemployment.

The Fed might need to re-examine its outlook - and policies- if that strength continues, he suggested.

Miserly employers aren't helping. Pay raises are all but invisible. Across the country, wages and salaries rose less ($25.5 billion) in January than in December ($29.9 billion) - even though the economy added 243,000 jobs in the interim.

That means, says Joel Naroff of Naroff Economic Advisors, that the pay increases must have gone disproportionately to unemployed people who found work and began collecting a paycheck - not the vast majority of workers who already had jobs.

In fact, once inflation and taxes are factored in, incomes fell in January.

Higher gasoline prices are threatening to pinch consumers just as they did last spring. Oil prices are up 9 percent this year to nearly $109 a barrel. And gasoline prices are up 30 cents to $3.74 a gallon over the past month, according to AAA's Daily Fuel Gauge.

Economists say today's prices probably won't do much damage to the economy. That's because the economy is healthier than it was early last year, when higher gas prices slowed growth and consumers cut back on clothes, food and other items.

But if gasoline prices blow past $4.50 a gallon this summer, perhaps because of tensions over Iran's nuclear program, all bets are off.

Consumers could scale back. That would cool an economy that relies on consumer spending for 70 percent of its output.

Expectations for economic growth this year are already muted. Beth Ann Bovino, senior economist at Standard & Poor's, expects growth to slow from a 3 percent annual rate at the end of last year to 2.1 percent this year and 2.3 percent in 2013.

"It's a very subpar recovery," she says. "Historically, after a recession ends, we would see 5 percent growth. ... I think we can survive $100 oil. But it's going to make this pretty lousy recovery feel even worse."



Next: Strong Retail Sales Are Sign Of Improving Economy



Don't Miss: Companies Hiring Now



Stories from OnlineDegrees.com

Add a Comment

*0 / 3000 Character Maximum

58 Comments

Filter by:
mikebw1

People need to stop blaming the financial mistakes of the American people on the government. It's the greedy oil companies. It's people who choose to buy imported material so they can save a penny and get CHEAPER quality merchandise. It's the employers who are so greedy they don't care if their employees starve. Its the people and banks that financed un-sound loans. It's the ones in wall street that think they are finance gods and that we the people owe them everything. It's not just one area of the economy that needs to be fixed. It's the entire picture that needs fixing. Our government though is toyally to blame for the government being broke. They also are clueless as to what to do with money. Face it, the entire world including you and I need to learn and understand financial responsibility and live by it.

March 04 2012 at 7:42 PM Report abuse rate up rate down Reply
Patricia

It's not Obama. It's the greed. He didn't set up the balloon mortages. Bank CEO's getting bonuses that are out of site, but can't afford a descent interest rate on Savings accounts. Where do these CEO's think the money is coming from. They think they are too big to fail

March 04 2012 at 5:04 PM Report abuse rate up rate down Reply
candalou2

I said this many times before, when people spend a big chunk of their income on gas, not nuch left to spend on anything else.

it has been and is,gas prices. I shout it from the roof top, gas prices.

March 04 2012 at 4:13 PM Report abuse +1 rate up rate down Reply
white41990

Maybe consider raising interest rates to prevent hyper inflation, and 5.00/gallon gas, until that's done we will never see 100% economic recovery, there won't be enough consumer confidence for it to happen.

March 04 2012 at 4:05 PM Report abuse rate up rate down Reply
Stephen

Hey the only way to keep the economy growing in the eyes of the Republican Party is to lower the wages of the working man by 20% to allow, only thoses who's parents can afford it, to attend college.
to eliminate Social Security, Welfare, goverment support for everyone but the the hallowed 1%
and the oil and gas industries and the day trader's who are responisble for the rise in gasoline and heating oil prices. For it is only when they pay less in taxes and have more to spend outside of the country will other countries have the excess cash to send us to support our own once prosperous nation
that has now fallen upon deperate times under the Tyranny of the Republican Party

March 04 2012 at 4:01 PM Report abuse +1 rate up rate down Reply
legacykwst

There will be no economic lift off.

Many of those who have fallen off the employment map are those in their mid to late 50s. They may have employed spouses and will just wait until they are 62 to collect Social Security or they may live off of their savings until 62 or they may try to get Social Security Disability.

Back in the 1980s it was projected that the retirement of the Boomers would cause a Depression... not just a recession, but a real Depression.... because retirees tend to have limited income and cut their spending on all but health care. They begin to draw down on investments.

Therefore, they tried to use the stock market as a way to bolster income and they tried to encourage both stock ownership and consumerism in the emerging markets.

Unfortunately, that has not worked out. Boomers will continue to spend, but it will mostly be from government benefits.... while fewer workers will be paying taxes at lower rates because the wages are lower and unemployment higher.

It's not a pretty scenario, but it has been predicted for 40 years... and it is playing out as predicted (even w/o the financial and housing crises).

March 04 2012 at 3:33 PM Report abuse rate up rate down Reply
frdm399

Americans have been tightening their belts since this guy's been in office. Let's see what the high gas prices do for the economy over the next 2 quarters. Looks like the Associated Press is trying to paint a rosier picture than what really exists.

March 04 2012 at 3:01 PM Report abuse +2 rate up rate down Reply
snoopydance1984

How exactly is the jobs picture brighter when AOL's top 10 "jobs" of the week are nothing but part-time minimum-wage jobs? (http://jobs.aol.com/articles/2010/04/07/top-10-companies-hiring/) You can't support yourself on that. Just ask anyone who works one or more of these part-time $7.50 or $8 an hour jobs if they're able to pay their rent, basic utilities, food, gas for their car, and car insurance. Most of them will say no.

The only reason the unemployment rate is even down right now is not because people are finding work, it's because people's unemployment benefits have run out.

This is just more typical media spin to make things appear better than they are.

March 04 2012 at 2:53 PM Report abuse +3 rate up rate down Reply
frdm399

Looks like more propaganda from the left. Annual real GDP for 2011 was 1.7%. Pathetic

March 04 2012 at 2:52 PM Report abuse +1 rate up rate down Reply
1 reply to frdm399's comment
slock84455

You are RIGHT again, it was so much better under W.

March 04 2012 at 5:12 PM Report abuse rate up rate down Reply
coniferk

Tell this news to the hardcore unemployed- those that gave up looking.
This is a taylor made story from Obama's media supporters. We will be seeing more of this "thing are looking up.."
I would love to see a story on whats really going on "out there"

March 04 2012 at 2:49 PM Report abuse +2 rate up rate down Reply
1 reply to coniferk's comment
frdm399

You won't, the left leaning media protects him at all costs. Even if it means they continue to lose even more credibility than they've already lost.

March 04 2012 at 2:58 PM Report abuse rate up rate down Reply

Search Articles

Top Companies Hiring

Week of Oct 19 - 26
View All

Picks From the Web