Despite widely touted news of an economic recovery the 15.3 million unemployed Americans face scant hope of an end to their troubles any time soon. Moreover, higher than expected new unemployment claims indicate that layoffs continue to contribute to the predicament. Many Americans see very little evidence of a recovery in their personal experience.
While those already unemployed face abnormally intense competition for those jobs available, those who remain unemployed are watching the contents of their savings decline. More people every day face the impending reality of foreclosure while only those with irreproachable credit have any hope of obtaining a new loan.
“We’re out of recession, but the recovery is not going to bring a whole lot of smiles,” said Joel Naroff, of Naroff Economic Advisors. New Commerce Department estimates showed the economy growing at an annual rate of only 3 percent. This estimate, based on new, more complete information was weaker that the initial estimate of 3.2 percent issued last month.
Consumer spending was lower than initially estimated as was business spending on both equipment and software. The nation’s trade deficit continues as a drag on the economy.
The US Labor Department reported that the number of newly laid off workers filing claims for unemployment benefits fell slightly to 460,000 last week, a level higher than at the start of the year. Economists had hoped that by this point in the recovery new claims would be in the 400,000 to 425,000 range, signaling expanding job growth to come. While a net 290,000 new jobs were added in April, far stronger job creation figures are required in order to reduce the current 9.9 percent unemployment rate.
Wall Street paid little attention to the dismal domestic economic news to focus on China, where stocks surged following Beijing’s announcement that it intends to maintain support for the Euro. Based partially on this news the Dow Jones industrial average climbed nearly 200 points in afternoon trading.
In normal times, an expansion rate of 3 percent would be considered strong for the U.S. economy, but a recovery from such a severe recession would require at least double the current rate in order to have an impact on the jobless rate. Economists estimate that a growth rate of 3 percent is required just to keep up with increases in US population, and a sustained growth rate of 5 percent would be needed to decrease unemployment by 1 percent. Economists have expressed little hope of seeing growth in the required range and in fact growth in the first quarter of 2010 was lower than the 5.6 percent rate shown in the final quarter of 2009.
The National Association for Business Economics foresees continued slow economic quarterly growth hovering around the 3 percent range throughout the remainder of 2010. Should this forecast hold true it is unlikely that employers will feel enough confidence to hire additional personnel and equally unlikely that consumers will be willing to make use of additional credit.
US businesses also face additional concerns related to the European debt crisis. Manufacturers expect to see lowered demand for US produced goods which could further impact domestic hiring. Housing and commercial real-estate continue to be viewed as major areas of weakness and builders cut spending in each by double digits in the first quarter of this year.