“While we have seen indications of improving economic activity in recent months, especially the strengthening of private sector employment, consumers' attitudes improved only marginally, and in some areas not at all, from a year ago, reflecting the continued unevenness and uncertainty of this recovery.” –Doug Duncan, vice president and chief economist, Fannie Mae
Now, I like to consider myself a “glass half full” kind of person, so when I review reports concerning the slow fits-and-starts type of economic recovery going on the U.S., I tell myself, “well, ‘slow’ is better than ‘none’ at the end of the day.”
Indeed, truckers are making the best of the slow economic recovery we’re enduring, too, for those that survived the hideous “Great Recession” of 2007-2009 aren’t going to wait around for perfect conditions in order to start making some money.
Still, it is disquieting to keep reading reports about how the U.S. economy keeps sputtering along.
For example, the latest Ceridian-UCLA Pulse of Commerce Index released by the UCLA Anderson School of Management and Ceridian Corp. this week posted a 0.5% drop basis in April, marking a continuation of what’s being dubbed “see-saw economic performance” over the past twelve months.
"Though down in April, the decline offset only a fraction of the exceptional 2.7% gain posted in March, which was sufficient to drive continued growth in the three month moving average of the PCI," said Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast.
"However, the disappointing 1.8 percent growth of real GDP [gross domestic product] in the first quarter remained consistent with the pattern of modest, fitful economic growth reflected by the PCI since the first quarter of 2010,” he added. “The most recent report reinforces our long held cautious, below consensus outlook for growth in GDP and employment.”
As a result, Leamer expects monthly employment gains to remain range bound between 150,000 and 200,000 new jobs, with GDP growth in second quarter ranging from 2% to 3%, not the 5% to 6% range necessary to drive meaningful reductions in unemployment.
Needless to say, the slow economic going continues to make consumers wary. According to Fannie Mae's National Housing Survey in the first quarter this year, Americans remain cautious about the recovery.
“Despite moderate signs of improvement in the housing market and the overall economy, consumer attitudes continue to be shaped by ongoing concerns about the recovery and their own financial situations," said Doug Duncan, vice president and chief economist at Fannie Mae. “Uncertainty regarding the improving labor market, expectations of little home price and interest rate movement, and rising household expenses has left consumers feeling less financially secure.”
Fannie Mae’s survey found only 33% of Americans said they believe the economy is on the right track, up four percentage points from the fourth quarter of 2010, but virtually unchanged from January 2010 (31%).
Another 40% say that their current monthly household expenses are significantly higher than twelve months ago, up from 34% in the previous quarter and 31% in January 2010. (You can thank high fuel prices for that, I suspect.)
The outlook isn’t much rosier over at Freddie Mac. “We also expect a pick-up in economic growth in the second half of 2011, which should help to propel additional job gains later this year,” noted Frank Nothaft, Freddie Mac’s chief economist. “Still, while the labor market is moving in the right direction, it still has a long way to go before the unemployment rate moves sharply lower.”
Nothaft added that the relatively modest job growth during the economic recovery has been a concern. While the labor market report for April from the Bureau of Labor Statistics carried some better news – employers added 244,000 jobs in April, the most in almost a year, with the private sector adding 268,000 jobs, the most in five years – that’s not enough to replace all the jobs lost since the recession.
“Employment has to rise by roughly 130,000 a month to just keep even with labor force growth, and if the participation rate rises over the next three years to its pre-recession levels, the economy will need another 130,000 a month just for that,” he explained. “Thus we will need more than a quarter-million new jobs a month – something we have not yet seen on a sustained basis.”
As a result, the April unemployment rate edged up to 9%, partly reflecting discouraged workers who have re-entered the labor market, and reflecting the 27th consecutive month that the unemployment rate was 8% or higher – matching the post World War II record set between November 1981 and January 1984. “It is clear a new longevity mark will be set,” Nothaft noted.
Not the happiest news to see, especially in terms of freight demand forecasts. Then again, it could be worse. Let’s take what we’ve got and move on from here.