Still a BBQ recovery: Low and slow

@CNNMoney June 3, 2011: 12:35 PM ET
When cooking on a grill, low and slow is best. But unfortunately for consumers, low and slow also describes GDP growth after the Great Recession.

When cooking on a grill, low and slow is best. But unfortunately for consumers, low and slow also describes GDP growth after the Great Recession.

NEW YORK (CNNMoney) -- Let's get this out of the way. The economy is in lousy shape. And it will continue to be for a long time. It's an awful truth but we must get used to it.

I called it the barbecue recovery almost a year ago to reflect that the rebound (a charitable term if there ever was one) will be low and slow.

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The May jobs numbers were awful, and some are citing that as evidence that the economy has taken a sudden turn for the worse. The recovery may now be at risk.

But this shouldn't be a surprise. Even before Friday's report, the jobs growth from earlier this year only qualified as decent. The recovery isn't really at risk. This is just further proof that the recovery wasn't that good to begin with.

Sure, some economists got duped late last year into thinking that the extension of the Bush tax cuts could lead to strong growth in 2011. But that was silly.

The only way for the economy to show sustainable improvement is for companies to start hiring again in a more aggressive fashion, the housing market to finally bottom and for the nitwits in Washington to stop bickering and actually have an intelligent conversation about the deficit.

This is something that will unfold over a period of years, not weeks or months. Keep in mind that the reckless fiscal behavior of consumers and the government that led to the credit bubble and Great Recession took place over a period of decades.

"The recovery is extraordinarily disappointing. It's not even a half-speed recovery," said Chris Probyn, chief economist with State Street Global Advisors in Boston. "It will take until probably 2014 at least to get back to the levels of employment even close to what we had in 2007."

The good news on weak jobs: Lower gas prices

And even if the Federal Reserve decides to saunter up to the bar and order a triple shot of that quantitative easing, the best that probably would do is just keep interest rates low enough so that the stock market doesn't collapse.

The Fed's bond buying made Wall Street and the big banks happy. It has not led to more loans for creditworthy consumers and small business and it has not created a wave of hiring. QE3 is unlikely to make a difference either.

That's the bad news. The good news (if you will) is that May's job numbers are probably not a sign of the beginning of a much-feared double dip recession.

"The economy is in a bit of a soft patch. There's no doubt about that," Probyn said. "But the double dip talk looks a little contrived."

Given all that has happened in the United States and around the world this year, it's understandable that the economy would slow and that businesses have started to lose confidence.

At home, floods and tornadoes have caused significant damage to states in the Midwest and South. Oil prices have skyrocketed as well, causing many consumers to cut back on spending.

Then there's the rest of the globe. There was a massive earthquake and tsunami in Japan. China and India are raising interest rates in an attempt to ward off inflationary asset bubbles. And oh yeah, Europe's economy is still mired in a debt crisis that makes the fiscal problems in the U.S. look like child's play.

"I'm not trying to sugarcoat this," said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida in Orlando. "But when you look at all the U.S. has withstood this year, it is a good sign that the economy is still on solid enough footing that there's job growth at all."

Snaith said he does not think the economy is about to enter another downturn. But he added that people should stop expecting a strong recovery.

There is not going to be a magical catalyst that will get consumers spending again. Sure, they may splurge during the fourth quarter holiday shopping season. But it won't be sustainable as long as the job market and housing market remain so weak.

Expect more fits and starts. Choppy data is the new normal.

"The recovery is going to be staccato. The damage that was done by the recession was substantial and that can't get cleared up overnight," Snaith said. "You may have bursts of spending but they won't last."

So even if we get some better readings on jobs or other parts of the economy later this year, don't be fooled into believing the economy is now going to take off -- especially if economists start tripping over themselves to raise their 2012 GDP forecasts.

"Everyone keeps expecting the economy to all of a sudden accelerate. People jumped on that bandwagon at the end of last year," Probyn said. "But that's not going to happen."

I think that Theodor Geisel put it best. And I don't want my colleague David Goldman to have a monopoly on citing Dr. Seuss in stories. I see his Lorax and raise him a Grinch.

The three words that best describe the economy are as follows, and I quote, "Stink, stank, stunk!"

Reader comment of the week. I can't stress enough how important it is for the job market to get better. So many people have been out of work for way too long. That is a crisis that needs to be addressed.

Or as Twitter follower @rugcernie succinctly puts it. "Economy isn't improving until #99ers are being hired -- period."

Amen to that. Anyway, The Buzz is off next week. Back on June 13.

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks. To top of page

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