Jobs are still roadblock on path to recovery

John W. Schoen Senior producer • Profile • E-mail

It’s still about jobs, jobs, jobs. Until the employment market starts showing signs of improvement, it will cast a pall over any “green shoots” of growth poking up through the destruction left by the worst economic meltdown since the Great Depression.

That's even though banks say they’re getting back in the black, home sales are perking up and inflation is low. It's simple: No jobs means no spending, even though President Barack Obama sees a light at the end of the tunnel.

"There is no doubt that times are still tough," Obama said in a speech to students at Georgetown University Tuesday. "But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America's future that is far different than our troubled economic past."

Fed Chairman Ben Bernanke cautioned in a speech Tuesday that once the recovery begins, there still will be plenty of work to clean up the financial mess.

"Recently we have seen tentative signs that the sharp decline in economic activity may be slowing," Bernanke said. "A leveling out of economic activity is the first step toward recovery.
To be sure, we will not have a sustainable recovery without a stabilization of our financial system and credit markets."

Until the recovery takes hold, there are other potential hurdles that could slow its arrival or weaken the upturn when it begins. And even if the economy begins turning up later this year, as many forecasters expect, the underlying damage to the financial markets, to the flow of credit and to consumer and business confidence will remain.

Video   Obama's full speech on the economy April 14: President Obama gives a speech on the economy at Georgetown University. MSNBC

That means that job losses, now running at more than 600,000 a month, are expected to continue well into next year.

That headwind is still clearly visible in the latest economic data. Though the stock market has rallied, consumers aren’t yet in a spending mood. The Commerce Department said Tuesday that retail sales fell unexpectedly in March.

The 1.1 percent drop was the biggest decline in three months and a much weaker showing than analysts expected. Car sales led the slump, but foot traffic was also weak at clothing stores, appliance outlets and furniture stores.

With demand weak, there’s little sign of inflation. Retailers continue to slash prices to try to boost sales. Energy and raw material producers are feeling the price squeeze as manufacturers cut production. Tuesday’s data on producer prices showed a 1.2 percent drop in March, led by a sharp drop in gasoline and other energy prices. Food prices also fell 0.7 percent.

The loss of consumer confidence is echoed by business managers in charge of hiring. Confidence among small businesses, the main source of new jobs, was stuck at 35-year lows in March, with employers stepping up layoffs even as the recession-hit economy shows some signs of improving.

The National Federation of Independent Business said in a survey released Tuesday that its index of small business optimism fell 1.6 points to 81.0 from February, the second-lowest reading in the organization's 35-year history.

NFIB Chief Economist William Dunkelberg said the survey also pointed to some early signs of optimism. Members reported credit was a bit easier to get, for example. But Dunkelberg said the overall outlook remains gloomy for now.

“The first thing I’ll look for is changes in expectations,” he said. “(Small businesses are) very pessimistic about the next six months in terms of the growth of the economy. The good news has to leak in there. Then they'll tell us sales are picking up. Then, of course, they'll start hiring people. That’s the sequence we'll look for."

The economic outlook is usually cloudiest just when it’s about to change, and the latest data are rich with conflicts. Forecasters seem to have split into two camps. There are those who believe the “green shoots” of good news are a sign that the recovery is nearing. Others suggest that it’s too soon to say things have hit bottom.

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