Weak job market could hamper US recovery

WASHINGTON (AP)- The job market is thawing at a snail’s pace, raising doubts about whether consumer spending will become vigorous enough to sustain an economic recovery anytime soon.

An index of economic indicators and a regional manufacturing report released Thursday raised some optimism. But an unexpected rise in first-time claims for unemployment aid signaled that jobless Americans are still having a hard time finding work

Americans may see little benefit from a recovery if jobs remain scarce and consumer spending stays too low to fuel a strong economic rebound.

“Consumer spending is going to have a very difficult time recovering with the labor market as weak as it is,” said Joshua Shapiro, chief US economist at MFR Inc.

Many analysts expect the economy to grow between two and three percent in the second half of this year, as businesses restock their shrunken stocks of goods. But spending is likely to remain subdued. And as a result, many of the same economists expect growth to slow in 2010.

Even when the downturn ends, “it’s still going to feel like a recession to the average consumer, the average business,” said Ken Goldstein, economist for the Conference Board, a private business research group.

Consumers have been hammered by job losses, declining wages and lost wealth. Home prices in many areas of the country have sunk in the past two years. Investments and savings have dwindled, too.

Some retailers that reported second-quarter earnings earlier this week managed to boost their bottom lines by slashing inventory and other costs. But their executives cautioned that shoppers likely will remain tightfisted.

Discounter TJX Cos., which operates T.J. Maxx, Marshalls and HomeGoods stores that appeal to shoppers seeking cheaper clothing and other products, reported an earnings jump of 31 percent. Profits at Target Corp. and Home Depot Inc. fell, but beat Wall Street expectations.

“We’re not expecting a big resurgence in consumer spending next year,” said Michelle Meyer, an economist at Barclays Capital.

The Conference Board said its index of leading economic indicators rose for a fourth straight month in July, gaining 0.6 percent. That was slightly less than economists expected, and it was a slower rate than in the prior three months.

Still, the index, intended to forecast economic activity over the next three to six months, suggests the recession has bottomed and the economy will soon start growing again. Six of the 10 indicators that make up the index rose in July. Consumer expectations were the biggest negative factor.

“Looks like the recession ended in June,” Tim Quinlan, economic analyst for Wells Fargo Securities, wrote in a research note.

The National Bureau of Economic Research, which officially declares the start and end of economic cycles, has in the past set an end-date to recessions after two to three straight months of gains in the leading indicators, Quinlan said.