The economic recovery that had been widely expected since late
spring now seems much less certain, raising the likelihood that a
strong rebound in hiring, wages and retail sales will not occur
before the fall, at the earliest.
Many economists have reached that conclusion in recent days
after confronting statistics and surveys that measure the economy's
recent performance. Economic conditions have clearly improved since
the spring, the data show, but the progress toward recovery seems
to have temporarily halted.
"We are going to live for a while in a situation in which it is
hard to discern good times," said James P. Smith, a senior
economist at Rand Corp.
For Smith and others, the issue is not whether the United
States is recovering from recession; it surely will, he says.
"The real question is whether our incomes are going to grow at
a faster rate than inflation," he said. "If not, or if the gain is
only 1 percent a year, who wants to wait 20 years to feel better?"
The public is clearly uneasy about the direction of the
economy, according to the University of Michigan's monthly surveys
of consumer attitudes.
The surveys show Americans apprehensive about their lagging
incomes, the banking crisis, the cutbacks in public services by
states and municipalities and the security of their jobs. All of
those concerns are likely to be exacerbated if little new wealth is
added to the economy in the next one or two years.
"It is not that people fear that the unemployment rate will
rise more," said Richard T. Curtin, director of the University of
Michigan surveys. "It is that they don't expect many people on
layoff to be recalled or new jobs to open up."
The unemployment rate was 6.8 percent last month, compared with
5.4 percent in July 1990, the first month of the recession.
The Bush administration and many forecasters had interpreted an
upturn in industrial production and in the sale of cars, appliances
and homes that began in May as a sign that a robust recovery might
Since July, sales of many items have tended to level off, and
two events in the last 10 days suggest the recovery could be in
The first was a Labor Department report, released on Aug. 2,
showing that 51,000 jobs had disappeared in July; it was the third
time in four months that layoffs reduced the number of job holders.
Then, on Tuesday, the Federal Reserve lowered interest rates to
stimulate borrowing and the economic activity that lending makes
The action was a tacit acknowledgment that the robust recovery
Alan Greenspan, chairman of the Federal Reserve, had been expecting
in mid-July has not yet materialized.
In case anyone missed the point, the Federal Reserve released
on Wednesday a survey of regional business conditions that
characterized the recovery as slow and unevenly distributed across
A similar regional survey, published in June, had been more
optimistic. The Midwest and the Southwest, while in recession, show
more strength than the hard-hit Northeast and other states on the
East and West coasts.
A weak recovery, running into the 1992 presidential election
year, would work against President Bush in his bid for re-election.
Administration officials applauded the Federal Reserve's
decision last week to reduce a key short-term interest rate.
They have been pushing for more more economic growth than the
Federal Reserve considers to be possible and this issue is
undoubtedly discussed by Greenspan and Michael Boskin, chairman of
the President's Council of Economic Advisers, in their frequent
contacts with each other.
Still the task of reawakening the economy is more difficult
than usual, many economists say, because this ninth recovery from
recession since World War II has some unprecedented aspects that
could delay an upturn. …