If you thought the recovery was on track—the economy growing again, unemployment slowly receding, housing prices stabilizing, the stock market rising—you thought wrong. In recent weeks, virtually every indicator has headed south. The only consolation, if you can call it that, is that such setbacks are hardly unexpected.
Let’s start with housing, which accounts for about 20 percent of the national GDP. This week, the most-watched housing index confirmed that prices have dropped to a new recession-era low, down in 19 of the 20 biggest metro regions from a year ago and confirming a double dip. The National Association of Realtors also reported a sharp 12 percent drop in pending home sales for April—meaning that further price declines are likely.
Then there’s the abysmal labor market. This week, ADP, a private payrolls firm, announced that the private sector added an anemic 38,000 jobs in May. That works out to just 760 jobs per state and is the worst growth since last September. (In April, by comparison, private employers added 177,000 jobs.) On top of that, initial unemployment claims—a leading indicator, suggesting where the unemployment rate is headed—are climbing back up. That has stoked fears that the May unemployment rate, which the Labor Department will announce Friday, might rise from last month’s 9 percent.
Indexes of confidence and industrial production—previously a bright spot in the economy—were also crummy. The most-watched manufacturing index came in short of expectations, falling from 60.4 to 53.5 from April to May. (Readings below 50 mean the sector is contracting, rather than than expanding.) Auto manufacturing and sales are also soft.