These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:
Economists expect the Labor Department will report the economy added 185,000 jobs in April, after adding 192,000 in February and 216,000 in March. While stronger than in prior months, jobs growth remains too weak, and the economy is in danger of slipping into a second recession. Longer term, the nation faces fundamental structural problems that neither political party seems willing to address in a comprehensive and systemic fashion.
In the first quarter, bad weather slowed construction activity, rising gas and health-care prices tapped off consumer dollars and weakened demand in other sectors, and defense and state and local government spending slowed. GDP growth was a paltry 1.8%–much less than economists forecasted in January and well below the minimum sustainable rate.
Growth less than 2% to 2.5% is not sustainable, because many businesses can meet such modest growth in demand by improving productivity and laying off workers to maintain margins in the face of rising energy and other commodity prices. Layoffs slice household income, and a negative cycle of reduced spending begins.
Indeed, the four-week moving average for new unemployment claims moved up to 408,000 for the week of April 23 from 390,000 the week of April 2. A rate below 350,000 is consistent with a strong economy and above 400,000 is perilously close to recession levels.
Without stronger growth in the second quarter, the economy will cycle down into recession–it can’t likely continue to drag along at about 2%.