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Economic data don't point to boom times just yet

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By Neil Irwin
Washington Post Staff Writer
Tuesday, April 13, 2010

Some of the talk about the state of the economy lately has grown downright giddy.

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Hiring has resumed! (After all, last month the nation had its strongest job growth in three years.) The stock market is booming! (Up 77 percent from its low 13 months ago.) America's Back! (So says the new cover of Newsweek.)

The economy is certainly growing, as it has been since last summer. And that growth appears more durable than it did just a few months ago, making a dip back into recession appear highly unlikely.

But the buoyant talk has gotten far ahead of the reality on the ground of the American economy.

That great March job number, for example, received a short-term boost from temporary Census Bureau hiring and the rebound from February snowstorms, so the underlying employment growth was somewhere around 50,000 jobs -- not the 162,000 that made headlines, and far below the 130,000 or so jobs needed to keep up with population growth. The number of people filing new claims for jobless benefits each week has remained stubbornly around 450,000, well above the levels expected in a hiring boom.

And while the stock market is up a lot, it has rebounded from generational lows. Much of the gains of the past year reflected the investors' conclusion that the economy wasn't going to collapse, not a harbinger of boom times ahead.

The U.S. economy will grow 3.1 percent this year, according to the consensus of forecasters surveyed by the Blue Chip Economic Indicators. That is far better than the steep declines of a year ago, but basically close to the long-term growth trend for the U.S. economy.

But that rate of expansion won't be enough to pull the economy out of the deep hole it is in, given a 9.7 percent unemployment rate, and is merely enough to keep the hole from getting any deeper. By contrast, after the last recession of similar depth, in 1981-1982, the economy experienced five straight quarters of growth in the 7 to 9 percent range from the spring of 1983 through summer of 1984.

On Monday, the semiofficial arbiter of economic cycles said it would be "premature" to conclude that the recession that began in December 2007 had ended, as economists widely believe, in the summer of 2009. Members of the National Bureau of Economic Research Business Cycle Dating Committee say they want more final data before making such a pronouncement, according to a memo the committee published.

This week, three pieces of economic data will be released that are expected to confirm that the economy expanded at a brisk pace in March: retail sales Wednesday, industrial production Thursday, and housing starts Friday are all expected to show strong gains.

But the springtime bloom is not the same as the kind of sustained strong growth that would drive joblessness back to normal levels and get factories humming at their potential again.

"There have always been Wall Street economists wanting to cheerlead the recovery, and quick to jump on any piece of news showing a great boom is around the corner," said Kenneth Rogoff, a Harvard economist. "The data so far are more consistent with a very moderate recovery."


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