On Friday, the Labor Department will unveil its report on May unemployment, and the country is bracing itself for yet more disappointment on the economic front. Payroll processing firm ADP said this week that private, nonfarm businesses added only 38,000 jobs in May, down sharply from the 177,000 increase ADP calculated for April. That figure points to only modest May job gains.
The recent glut of discouraging economic indicators seems to suggest that the recovery is grinding to a halt. There were 422,000 new jobless claims for the week ending May 28, well above the 375,000 level that is seen as a threshold signaling job growth. The Standard & Poor's Case-Shiller Home Price Index shows that home prices have hit a new post-recession low, and are now at their mid-2002 levels. The Conference Board, a business research association, has reported recent drops in consumer confidence, as well as its Leading Economic Index, a composite figure that reflects 10 indicators, including stock prices, money supply, and consumer expectations. The Bureau of Economic Analysis announced last week that first-quarter GDP for 2011 would remain at an unrevised and uninspiring 1.8 percent. And, despite a slight dip post-Memorial Day, gasoline costs well over $4 per gallon in some parts of the country. [Check out a roundup of political cartoons on gas prices.]
What happened to the recovery? The answer to that question depends on who you are.
For many economists, the recovery hasn't gone anywhere; the economy merely remains fragile as it continues its bumpy and slow climb. But politicians, and particularly a president facing tough reelection fights in 2012, must understand that the recovery has yet to begin for many voters. Indeed, no president since Franklin Delano Roosevelt has won office with an unemployment rate where it is now, a fact not lost on the current occupant of the White House.
Even in light of an abysmal housing market and an altogether discouraging set of May indicators, it would be wrongheaded to proclaim the recovery over. "The bottom is just not falling out of this economy," says Ken Goldstein, an economist at the Conference Board. "It's an economy that's bobbing in choppy water. It's not sinking; it's just bobbing through the waves." [Read: No Reason to Cheer Drop in Jobless Claims.]
David Shulman, senior economist at the UCLA Anderson Forecast, agrees that, while the recovery may be slow, it is not stopping. "If this were a normal recovery, the economy right now would be on cruise control at 50 miles per hour," he says. "We're probably at best at 35 to 40 miles per hour, and it seems like we're slowing down at 10 or 15 mph right now. [But] I don't think we're going in reverse yet."
Indeed, it is indisputable that the economy has come far from its recession nadir and is still moving in the right direction, with GDP on the rise and new jobs being created. Goldstein says definitively, "Nobody thinks that we're going to fall back into recession."
Economics experts, however, make up a far smaller portion of the electorate than unemployed or underemployed Americans, who do not feel every 0.1-percent drop in the unemployment rate. As he ramps up his 2012 campaign, Obama must face an unnerving duality: as a policymaker, he must keep a watchful eye on the economy's precarious climb. As a candidate, however, he must recognize that those numbers mean little to America's jobless and working poor. [Read: Obama's Secret Weapon for 2012: the Economy.]
"For a significant portion of the population, it's not a question of whether the recovery is stagnating; it never got started," says Celinda Lake, Democratic pollster. Lake says she has seen this attitude in her firm's research. When officials and economists first said the economy was coming back, she says, "we went into focus groups, and people said, 'I don't know [where] you're getting this from. This is not what we're seeing.'" Republican pollster Jon McHenry says that his research shows the same skepticism toward economic numbers. "A slowly growing economy is an economy that doesn't have any growth at all. [Voters] want to know that there are more job opportunities out there," he says.