WASHINGTON (MarketWatch) — Slackening U.S. and global growth likely means the nation’s unemployment rate will remain stuck around 8%, reducing the odds of a faster economic recovery kicking in before the end of the year.
The lackluster state of the economy was made readily apparent again last week by the preliminary report on second-quarter gross domestic product. Growth slowed to 1.5% from 2.0% in the first quarter and 4.1% in the fourth quarter.
That’s about half the rate economists would expect in a healthy recovery several years after a recession ends. Read reactions to GDP report. Declining growth occurred mainly because consumers pared spending and businesses invested at a slower pace.
And with a slew of recent data showing further weakness in the economy, there’s little reason to believe growth will accelerate anytime soon. See charts of GDP report.
Most of the data on this week’s jam-packed calendar, including the critical monthly jobs report for July, are expected to confirm that view.
Net hiring likely rose by a modest 110,000 last month, according to the latest MarketWatch survey of economists.
Other key reports will put a spotlight on consumer spending, auto sales and manufacturing levels. None of them are expected to be especially strong.
“There’s nothing you can see that will reignite growth,” said Nigel Gault, chief U.S. economist at IHS Global Insight. “We are in a position of looking for things that can keep the economy going at a modest pace.” What comes first? Once again, the economy faces a chicken-and-egg scenario.
The U.S. cannot grow much faster until businesses step up hiring, but companies won’t add workers unless customers boost purchases of their goods and services.
The result: a shackled economy unable to break free and expand rapidly. The good news — if it can be called good — is that economic activity appears sufficient to keep the U.S. growing at or near its current pace.
Most sectors are still expanding, though more slowly than earlier in the year. In other words, another recession is unlikely barring a catastrophic event, such as the demise of the euro zone.
“We don’t think we will see a double-dip recession, but it’s hard to find any source of acceleration,” said Yelena Shulyatyeva, an economist at BNP Paribas.
The labor market certainly isn’t a big help. Job growth has averaged a meager 75,000 over the past three months, just one-third the rate of hiring compared to late winter.
That’s not even enough to absorb all the new workers who enter the labor force each year — never mind drive down the nation’s 8.2% jobless rate.
The biggest source of economic growth is consumer spending, but Americans have cut back over the past few months. The latest reading on personal spending and income, released Tuesday, is expected to show barely any increase at all in July.
The report on spending, however, might have a silver lining. The MarketWatch survey projects that income rose 0.4%.
If hiring isn’t going to increase any faster, higher wages for workers is the next best way to get them to spend more and boost growth. “Income should increase because of a pickup in hours worked,” Shulyatyeva said.
The manufacturing sector, meanwhile, has cooled off after prolonged surge in the aftermath of the 2007-2009 recession. A number of regional and national surveys show growth has dampened.
The latest manufacturing survey by the Institute for Supply Management, issued Wednesday, is projected to rise slightly for July to above the critical 50% mark that signals expansion.
Still, the 49.7% reading in June was the lowest since the recession ended in mid-2009. Auto sales for July are expected to total about 13.8 million at an annual rate.
That would be a relatively strong number, but down from a 14.1 million rate in June. Investors will also keep a close eye on Wednesday’s regular gathering of top Federal Reserve officials.
Analysts believe the Fed is very close to launching another effort to stimulate the economy, but most expect the central bank to wait until the end of the summer.
In the absence of any growth triggers, the economy is unlikely to expand much faster in the third quarter than it did in the spring.
“A month ago, we thought the U.S. would grow as much as 2%. We don’t think so now,” Gault said.
“This is a different type of recovery than we’ve seen in the past. We haven’t had much of a recovery so far.”
marketwatch.com
The lackluster state of the economy was made readily apparent again last week by the preliminary report on second-quarter gross domestic product. Growth slowed to 1.5% from 2.0% in the first quarter and 4.1% in the fourth quarter.
That’s about half the rate economists would expect in a healthy recovery several years after a recession ends. Read reactions to GDP report. Declining growth occurred mainly because consumers pared spending and businesses invested at a slower pace.
And with a slew of recent data showing further weakness in the economy, there’s little reason to believe growth will accelerate anytime soon. See charts of GDP report.
Most of the data on this week’s jam-packed calendar, including the critical monthly jobs report for July, are expected to confirm that view.
Net hiring likely rose by a modest 110,000 last month, according to the latest MarketWatch survey of economists.
Other key reports will put a spotlight on consumer spending, auto sales and manufacturing levels. None of them are expected to be especially strong.
“There’s nothing you can see that will reignite growth,” said Nigel Gault, chief U.S. economist at IHS Global Insight. “We are in a position of looking for things that can keep the economy going at a modest pace.” What comes first? Once again, the economy faces a chicken-and-egg scenario.
The U.S. cannot grow much faster until businesses step up hiring, but companies won’t add workers unless customers boost purchases of their goods and services.
The result: a shackled economy unable to break free and expand rapidly. The good news — if it can be called good — is that economic activity appears sufficient to keep the U.S. growing at or near its current pace.
Most sectors are still expanding, though more slowly than earlier in the year. In other words, another recession is unlikely barring a catastrophic event, such as the demise of the euro zone.
“We don’t think we will see a double-dip recession, but it’s hard to find any source of acceleration,” said Yelena Shulyatyeva, an economist at BNP Paribas.
The labor market certainly isn’t a big help. Job growth has averaged a meager 75,000 over the past three months, just one-third the rate of hiring compared to late winter.
That’s not even enough to absorb all the new workers who enter the labor force each year — never mind drive down the nation’s 8.2% jobless rate.
The biggest source of economic growth is consumer spending, but Americans have cut back over the past few months. The latest reading on personal spending and income, released Tuesday, is expected to show barely any increase at all in July.
The report on spending, however, might have a silver lining. The MarketWatch survey projects that income rose 0.4%.
If hiring isn’t going to increase any faster, higher wages for workers is the next best way to get them to spend more and boost growth. “Income should increase because of a pickup in hours worked,” Shulyatyeva said.
The manufacturing sector, meanwhile, has cooled off after prolonged surge in the aftermath of the 2007-2009 recession. A number of regional and national surveys show growth has dampened.
The latest manufacturing survey by the Institute for Supply Management, issued Wednesday, is projected to rise slightly for July to above the critical 50% mark that signals expansion.
Still, the 49.7% reading in June was the lowest since the recession ended in mid-2009. Auto sales for July are expected to total about 13.8 million at an annual rate.
That would be a relatively strong number, but down from a 14.1 million rate in June. Investors will also keep a close eye on Wednesday’s regular gathering of top Federal Reserve officials.
Analysts believe the Fed is very close to launching another effort to stimulate the economy, but most expect the central bank to wait until the end of the summer.
In the absence of any growth triggers, the economy is unlikely to expand much faster in the third quarter than it did in the spring.
“A month ago, we thought the U.S. would grow as much as 2%. We don’t think so now,” Gault said.
“This is a different type of recovery than we’ve seen in the past. We haven’t had much of a recovery so far.”
marketwatch.com
No comments:
Post a Comment