- The Washington Times - Friday, December 4, 2009

This week saw another rash of mixed economic data that continues to call into question the economic recovery - not so much whether there is one, but rather how strong or how fleeting it is.

Amid the tepid recovery thus far, the stock market, as measured by the S&P; 500, has risen 22 percent for the year, but a far more impressive 61 percent from its March low. But to put this rebound in perspective, the S&P; 500 remains dramatically below its October 2007 peak. Although the stock market tends to be forward-looking, the counterpoint figure for its strong move is domestic employment, or rather unemployment. In my view, the lack of job creation could jeopardize the current recovery if new full-time, good-paying jobs are not created.

Already this year, we have lost several million jobs, and unemployment for October stood at 10.2 percent. And keep in mind, this is the official figure; the “unofficial unemployment rate” yields a more alarming figure.

The unofficial unemployment rate begins with the official rate and then adds in everyone else who should be working full time but is not, including those whose hours have been reduced from full time to part time, those who have become so discouraged they have given up looking for work and those who are “marginally attached to the labor force.” Tallying these figures suggests a rate as high as 20 percent.

On Friday, we will get the freshest read, as the Department of Labor releases that statistic for November. We have some preliminary reads from the weekly jobless claims data, as well as ADP’s National Employment Report. The number of new weekly jobless claims has fallen from the peak of 650,000 to 457,000 this past week, but continuing claims not only expanded this week but also topped expectations. Continuing jobless clams for the week were 5,465,000, higher than both the 5,423,000 figures from last week and the 5.4 million expected for this week per Briefing.com.

The ADP employment report was also a mixed bag. According to the report, nonfarm private employment fell 169,000 from October to November on a seasonally adjusted basis. On the positive side, November was the eighth consecutive month during which the decline in employment was less than in the previous month. However, the 169,000 contraction was greater than the 148,000 loss that was expected.

Just to show the data continues to be conflicted, according to Challenger, Gray & Christmas Inc., planned firings fell 72 percent in November to 50,349 from 181,671 during the same month last year. But on a sequential basis, planned firings fell 9.6 percent in November compared with the October figure. The rationale behind the improvement is that we appear to be coming out of the woods when it comes to downsizing, but demand has yet to accelerate enough for companies to add workers and the unemployment rate will remain above 10 percent into the first half of next year.

With close to 70 percent of our domestic economy driven by consumers, it becomes rather easy to see why recent retail sales statistics favor discount stores and the like. But here’s the ripple effect - if consumers are not spending, certain vendors will win while others will lose. Those that lose out have started to close stores. As more store locations close, rents go unpaid. As rents go unpaid, problems arise for commercial real estate and the institutions that backed their projects. Clearly if jobs are not created - and by that I mean full-time jobs with good wages that enable consumers to feel comfortable enough to spend not on just items they need but discretionary ones as well - the risk remains of other shoes dropping, such as a double-dip recession.

With a $1.4 trillion federal budget deficit as a backdrop, the time for bold decisions and fresh ideas toward job creation has come. With only 29 percent of the funds associated with the $787 billion American Recovery and Reinvestment Act of 2009 paid out as of Nov. 20, according to the government’s official Recovery.gov tracking site, one would think there is ample dry powder to kick-start the job-creation process. But with the vast majority of those paid-out stimulus funds being used for tax benefits and entitlements while the minority has been for contracts and loans, one has to wonder as well.

I hope that President Obama’s job summit breaks new ground, however when I think of how long it will take to release those funds and exactly what kind of projects will get funding, I wonder when the official unemployment rate will once again be below 10 percent. And when will it reach 5 percent again?

c Chris Versace is director of research at Think 20/20 LLC, an independent research and corporate access firm based in Reston. He can be reached at cversace@washingtontimes .com. At the time of publication, Mr. Versace had no positions in companies mentioned. However, positions can change.