Thursday, April 2, 2009

The slow, bumpy road

Analysts have been warning for months that economic recovery will feel little like a smooth incline and more like a mountain bike trail - a few dips and lots of bumps.

Today's news of record jobless claims - 669,000 in the past month - shows that the U.S. labor market remains weak. That's especially true locally; Charlotte's numbers, released yesterday, show a 11.7 percent unemployment rate, up more than a point from last month.

Those figures, both local and national, seem particularly sobering after recent encouraging indicators had prompted some sunnier forecasts from economists.

That optimism - cautious as it is - remains. Other reports this week include pending home sales rebounding in February from a record low, and manufacturing activity contracting in March but by a bit less than anticipated.

Even the auto industry provided a glimmer of less-than-horrible. Despite a 37 percent drop in sales from March 2008 to this year, but consumers lured by record incentives pushed the February-to-March increase above the normal rise that comes at the end of winter, the Associated Press reported.

That 25 percent increase prompted a little optimism in the gloomy auto sector.

"Maybe we'll get — imagine that — some momentum going," said Mike DiGiovanni, executive director of global market and industry analysis for General Motors Corp.

Last week, UNC Charlotte economist Carol Swartz reminded Squeeze readers that when economic recovery starts, businesses see their orders and sales increase. Only when they are confident that the activity is lasting will they begin to hire again.

We are, clearly, at the beginning of that process. Most analysts continue to project slight economic growth late this year. Even economist Nouriel Roubine, nicknamed Dr. Doom after correctly predicting the recession far ahead of his colleagues, is seeing signs that a slow recovery might be ahead.

Says Roubini, in his weekly column today for Forbes: "One can expect a slow and painful process of mending the U.S. and global economy that will still take a long time. That will, however, allow us to see the light at the end of the tunnel some time next year, first for the real economies, next for financial markets and finally for the financial system and its wounded institutions."

But, he warned: "The road ahead is still very, very bumpy."

This week is yet another unpleasant reminder.