Federal Reserve Chairman Ben Bernanke calls them “green shoots” — the rising housing sales and factory orders and small market gains that signal an economy coming out of its downward spiral.
But then, new jobless figures trampled them.
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Looking at the numbers, the economy seems to be moving in two directions. First some springlike signs of hope, then the jump in unemployment with 13.2 million out of work.
Even under the best of scenarios, the signs of recovery will be mixed, with employment among the last to improve. For President Barack Obama, that spells potential trouble with a so far tolerant public.
“The job market has fallen off the cliff over the past five months and the massive hemorrhage in the job market will continue,” California State University economist Sung Sohn concluded grimly.
Unemployment rates are notoriously poor indicators of economic cycles. Joblessness tends to peak long after a recession has officially begun and it tends to dip long after a recession ends. Markets need to stabilize and improve, orders for goods need to increase and employers need to gain confidence before hiring begins. The 16-month recession of the 1970s ended in March 1975, but unemployment peaked at 9 percent in May 1975 and didn’t dip below 8 percent until January 1976. Similarly, unemployment after the 1981-82 recession remained above 10 percent for seven months after it was declared officially over.
This time, Sohn predicts unemployment will exceed 10 percent well into 2010.
By then, the economy could be in recovery but millions of Americans would still be in pain.
Already economists were seeing glimmers of a turnaround in increased home sales. The stock market has been bullish for more than two weeks. Automakers cheered March car sales, which though bleak compared with a year ago improved over February.
Unemployment is the public’s main measure of the economy. Those Americans who do not experience it firsthand know a neighbor or family member who has. They notice it in the lack of pay raises and in the hiring freezes at work.
More Americans know the unemployment rate than know the level of the Dow Jones industrial average. And among those who don’t know, most think the rate is actually higher, according to a new poll by the Pew Research Center. So far, the public has shown great forbearance for Obama’s economic policies. And while the administration has been highlighting some of the positive signs in the economy, it also has been calling for patience.
“What they’re doing is making it clear to the American people that there are no quick fixes,” said Democratic strategist Chris Kofinis. “That kind of brutal honesty buys you time.”
Back in January, Obama’s economists forecast that without an economic stimulus package unemployment would peak at about 9 percent toward the end of 2010. Last month’s 8.5 percent rate put the country nearly there.
“It’s time for an economic recovery plan that lays out a path back to prosperity through fiscal discipline and tax relief, not out-of-control government spending at the expense of our children and grandchildren,” said Rep. Mike Pence of Indiana, a member of the House Republican leadership.