What The Economy Looks Like at Stall Speed
An encouraging jobs report might soothe fears of recession, but the economy still faces challenges
The economic problems the U.S. faces run much deeper than a deal among
As economists look back at a dismal first half of 2011, the outlook for the remainder of the year doesn't look much rosier. The much-anticipated recovery economists expected to see has all but petered out, leaving the door very much open for another recession, experts say.
Here's a look at four other stats that are stifling the U.S. economy:
The economy added 117,000 jobs in July, a bright spot that might help soothe fears about a double-dip recession. Nevertheless, optimism about the labor market has largely faded as the overall pace of job growth has fallen dramatically over the past few months. More than 10 million Americans remain unemployed-44 percent of them out of work for more than six months -- an intractable weight on the economy when measured against the dearth of job creation. Just 46,000 jobs were added in June compared to well over 100,000 on average earlier in 2011. Weak hiring and job losses in the public sector have held down job creation, experts say, crimping hopes for more robust economic growth in the second half of the year.
"Based on the news we've been getting over the past seven days, this number is as good as it gets," says
While the jobs numbers were better than expected, the economy still has a long way to go, Laurenti says.But things are looking up. Wages, which have been flat for months now, edged up 0.4 percent, indicating that the jobs being created are paying a little better. "Almost half of the jobs [created] are coming from sectors that are better paying than average," Laurenti says. "It's not enough to make up for the job losses we've had over the past several years, but it's positive."
Just two years after the economy was said to be in recovery, output still hasn't returned to pre-recession levels. Gross domestic product -- a key measure of economic health -- grew a measly 1.3 percent in the second quarter. That, coupled with dismal 0.4 percent growth in the first quarter (revised down from 1.9 percent), means the economy is barely limping along at stall speed, economists say. Historically, the U.S. economy has grown by more than 3 percent annually, on average.
Perhaps more troubling is new data that shows the economic damage sustained during the recession was actually worse than previously thought. According to new government data, the economy shrank by 5.1 percent, a full percentage point more than the previous figures. That means the economy has even more wreckage to climb out of, notwithstanding the sluggish recovery afflicting the U.S.
"Slower growth tends to mean that you're closer to recession, just by definition," says
That hasn't been lost on bond investors, who are showing signs of unease about the future prospects for economic growth in the U.S. "There's some fear out there about a possible double-dip recession," she says. "Yields are staying low across the board and the [yield] curve is flattening. I think the bond market is trying to signal that there is concern about further slowing in the economy." Yields on 10-year Treasuries sank to 2.47 on Thursday, down from more than 3 percent in late July.
Experts aren't sure whether the U.S. economy will descend into a full-fledged recession, but it's clear the recovery has slowed down considerably, which could create even more fiscal drag as the year goes on.
After a relatively strong start in 2011, gains in the manufacturing sector have tapered off, yet another sign that the fledgling recovery the U.S. saw earlier this year is faltering. The ISM Manufacturing index, which tracks manufacturing activity, fell to 50.9, the worst month for U.S. manufacturers in two years. While the July reading is still technically in expansion territory -- above 50 -- it's barely above the break-even mark, leaving little wiggle room before it heads into contraction.
"Manufacturing, like the rest of the economy, looks stalled right now,"
Adding salt to the wound, businesses cut back on orders for durable goods such as autos, construction equipment, and airplanes, one sector of the economy that had been fueling what little growth America has seen over the past few months. While demand is still higher than the trough it fell to during the recession, experts blame high energy prices and the earthquake in
Experts hope that with prices stabilizing and temporary shocks working their way out of the system, manufacturing and the economy will regain its footing.
Making up almost two thirds of GDP, consumer spending continued to flatline in June, falling 0.2 percent after gaining 0.1 percent in May. While slight, the drop was the first decline in nearly two years and a signal, experts say, of concerns about a weak job market and sinking home prices. But while higher oil and food prices might have had a temporary dampening effect on consumer spending, worries about jobs and the housing market will likely stick around for some time, discouraging Americans from spending money.
The good news is that economy ramped up job creation in July and earnings have increased slightly. Those factors put together could stimulate more consumer spending, experts say, softening the impact of other economic ailments afflicting the nation.
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