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U.S. Economy Is Still Struggling
By Paul Villella
April 25, 2012

Data released in recent weeks suggest that the U.S. economy is still struggling. The recovery is fragile, with a number of potential hurdles to contend with.

On the plus side, one measure of future economic activity rose in March for the sixth straight month, a sign that the economy could be gaining momentum. The Conference Board said last week that its index of leading economic indicators rose 0.3 percent in March, after a 0.7 percent increase in the previous month. The index now stands at 95.7, the highest level since June 2008. Before the recession began in December 2007, it routinely topped 100.

Most Indicators Increased

Seven of the 10 indicators covered by the index increased last month. The index is designed to anticipate economic conditions three to six months in the future.

This rise comes even as other indicators released last week suggest the economy could be slowing. The number of people seeking unemployment benefits dipped last week but remained higher than it has been in recent weeks. Additionally, Americans bought fewer previously owned homes in March, a reminder that the housing market remains weak.

"Despite relatively weak data on jobs, home building and output in the past month or two, the indicators signal continued economic momentum," says Ken Goldstein, an economist at the Conference Board.

Reuters Poll: Economy Improving

Adding to the positive momentum, a Reuters poll of economists last week found that the U.S. jobs market is slowly improving. They pointed to the "reasonably solid growth at the start of the year" which brightened the economic outlook for 2012.

The economists polled by Reuters said that better-than-expected data in the first months of the year pushed growth estimates for the first quarter up to an annualized rate of 2.2 percent.

Part of what has lifted optimism on growth has been the resiliency demonstrated by American consumers who have endured rising gasoline and oil prices, says Sam Bullard, senior economist at Wells Fargo Bank. "Spending has been holding up reasonably well despite these higher gas prices, which we knew was going to weigh on consumer spending," says Bullard.

"Economy Has Continued to Improve"

"The economy has continued to improve in recent weeks, yet activity appears to be slowing in some areas as we move into the second quarter of 2012," says Nathaniel Karp of financial group BBVA. Karp expects that growth will accelerate slightly in the coming months.

Meanwhile, the Federal Reserve has held interest rates close to zero as part of its efforts to bolster the economic recovery. The central bank has also said it will likely keep rates at ultra-low levels at least through to 2014.

On the jobs front, economists see the unemployment rate averaging 8.1 percent this year, much lower than the 8.5 percent consensus in January and under the March jobless reading of 8.2 percent.

A forecast of the labor market may add only an average of about 170,000 jobs each month this quarter and remain below 200,000 through to the end of next year. That is barely enough to keep up with population growth.

Still, the last week has seen strong corporate earnings from Morgan Stanley, eBay, Southwest Airlines and Bank of America. Likewise, software giant Microsoft produced a surprisingly strong quarter to start the year.

Our eyes now turn to Friday, when the Labor Department will report on the number of new jobs created in April -- anything less than 200,00 will be a disappointment -- and the April unemployment rate, which will probably remain at its current level of 8.2 percent or drop slightly.

Paul Villella is HireStrategy’s President & CEO. HireStrategy provides contract staffing services, direct hire search, and executive search solutions in the technology, finance & accounting, sales & marketing, human resources and administrative professions. HireStrategy, an Inc. 5000 company, has been ranked by The Washington Business Journal as the top staffing firm in the Washington DC region, and recognized by Washingtonian Magazine as one of Washington's "Great Places to Work."

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