Recovery Going Soft?

Despite signs of sustainable growth leading into 2012, recent slowdowns and downward revisions of first quarter figures are causing concerns over the economy?EUR??,,????'???s ability to keep improving.

New indicators are raising the possibility that the first quarter?EUR??,,????'???s strong economic showing has slowed, dragged down by escalating overseas problems and ongoing domestic uncertainty.

Employers added a seasonally adjusted 69,000 jobs in May, according to the Labor Department, marking the smallest increase in a year. The unemployment rate increased from 8.1 to 8.2 percent, and the underemployment rate, which includes part-time workers who want full-time work and people who have given up looking, climbed from 14.5 to 14.8 percent.

Unemployment has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948. Construction companies cut 28,000 jobs in May, the most in two years, and government payrolls declined as well, though service and retail companies increased their employment.

The first quarter GDP rate was also downwardly revised, from 2.2 to 1.9 percent, causing some analysts to speculate that the better-than-expected first quarter numbers (attributed to a warmer winter) were not that much better after all. The housing market has shown modest improvements, but that sector has nowhere to go but up after posting some of the worst numbers on record in 2011.

A recent CBO report garnered headlines by calling attention to the expiration of the Bush-era tax rates and a round of automatic budget cuts that could throw the economy ?EUR??,,????'??over a fiscal cliff?EUR??,,????'?? and back into recession going into 2013. The disappointing jobs numbers stoked investor fears, and The Dow Jones Industrial Average fell more than 200 points on June 1, giving up its gains for the year. Concerns about Greece?EUR??,,????'???s possible exit from the Euro zone, as well as mounting debt problems in other EU members like Spain and Portugal, have American investors worried as well.

If the problems continue, it will be the third year in a row that the recovery has made a strong showing early in the year, only to drop off as spring and summer roll on. Policy makers at the Federal Reserve, scheduled to meet June 19-20, are increasingly likely to take further action in an attempt to spur the economy forward.