Much of the U.S. business world, it seems, is in a bit of a funk. Suffering from a good old-fashioned case of the blahs.
Consumers are wary, careful with their spending. The job market is hardly on a tear. The stock market is flat. The economic recovery has slowed. Corporate profit growth has, too.
To be sure, things aren’t terrible: Payrolls aren’t shrinking. Stocks aren’t tanking. There’s no recession. Profits are still increasing, just not as much.
But many people aren’t finding much to get excited about.
Leo Kamp, economist at giant TIAA-CREF retirement system, describes the economy and markets as “plodding into the fourth quarter … without much clear impetus or excitement.”
“Most of the data we’ve gotten of late is on the sluggish side,” he said. “I don’t see the catalyst for a major acceleration in the economy.”
Consumers have noticed.
Sally Wildman, of Evanston, for example, said she does not feel the economy is noticeably better or worse.
“I don’t think there are dramatic changes other than when people lose a job,” she said. “There haven’t been as many recent job losses among people I know in the past year as there were in prior years. However, some people I know with small businesses continue to see a down cycle.”
When it comes to the economy, the word “soft” is tossed around a lot. Merrill Lynch economists describe consumer confidence as “squishy-soft.” Late last week, Ken Goldstein, economist for the Conference Board private research group, said the much-watched leading indicators “continue to soften” as they declined in August for the third consecutive month.
And earlier this month, Federal Reserve Chairman Alan Greenspan told Congress that “economic activity hit a soft patch in late spring,” with significantly slower consumer spending and moderating employment gains.
In raising interest rates last week, however, the Fed indicated output had regained “some” traction, and labor conditions had improved “modestly.”
To many, that’s an apt term.
The economy continues to generate jobs, but hardly at a pace to quicken the pulse–nationally, only 313,000 non-farm jobs in the past three months, fewer than in April alone.
Gus Faucher, a senior economist at Economy.com, notes that in recent months, the U.S. is struggling to create enough jobs to absorb all the people entering the labor force.
“Jobs are growing, but certainly not at the pace we’d like to see,” he said. “We still haven’t gotten back all the jobs when employment peaked.”
Illinois’ jobless rate in August was 6.1 percent, compared with 5.4 percent nationally. All of 700 non-farm jobs were created in the state during August.
George Putnam, an economist with the Illinois Department of Employment Security, said there has been little momentum for job growth in higher-end business services jobs, such as consulting and computer services, and manufacturing continues to struggle.
“There’s not a more broad-based kind of demand out there” in manufacturing, he said. “Instead, what you still find are layoffs, firms shrinking down from two shifts to one shift.”
While economists worry about the economy being “soft,” the operative word for the stock markets has been “flat.”
After a rally last year, stocks have traded in a fairly tight range this year, with the benchmark Standard & Poor’s 500 index down less than 2 points, or all of 0.2 percent, for the year.
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In a sign of a lackluster market, the Chicago Board Options Exchange’s volatility index closed earlier this month at its lowest level since February 1996.
Experts say they see a stock market concerned about oil prices and slowing corporate profit growth. Several firms have issued downbeat forecasts recently, and analysts tracked by Thomson Financial expect third-quarter S&P 500 profit growth to fall under 20 percent for the first time in a year.
The overall situation is strong enough to keep the market propped up, they say, but many see little catalyst for a renewed rally. S&P chief investment strategist Sam Stovall, for example, notes the bull market begins its third year on Oct. 10, and points out that stocks have gained only 3 percent, on average, in the third year of a bull market since 1942.
Half the time, he said, the market declined.
Some analysts, however, are more optimistic. Brian Belski, market strategist at Piper Jaffray, believes stocks are discounted enough and have the potential to rally.
“People are defensively postured and very pessimistic,” he said. “We believe that negativity is in the process of peaking.”
Similarly, some are optimistic about potential job growth.
Many economists consider the staffing industry a harbinger of employment trends, and executives at several firms say the outlook has improved.
“The businesses that we call on have been more receptive to seeing us in the past six months or so,” said Jay Velinder, president of the Lakeshore Staffing Group in Chicago.
“They’re telling us they’re hiring people.”
Eventually.
“The hiring that they’re doing–they’re very, very picky and are extremely cautious about bringing someone in,” he said, noting that firms have more applicants and the selection process is taking longer.
Jean Kripton-Durham, president of Jean Kripton Inc. in Chicago, says job-seekers have to offer the right skills.
“Firms are hiring, but they’re being very specific. They want what they want,” she said.
“I feel like it’s picking up, but people have to be prepared in a different way.”
Chaneice Brown, a management consultant in Chicago who received an MBA from Northwestern University’s Kellogg School of Management in June, has seen a pickup in hiring with her former classmates.
“Even comparing this year versus the previous year, the number of job offers has increased,” she said, adding that most had offers “and some had multiple offers, which was a change from the previous year. Recruiting on campus has come up quite a bit.”
But, she said, that’s not necessarily prompting them to rush out and spend to help cure the economy’s blahs.
“People are just a little cautious,” she said. “I don’t think they’ve been better long enough for people to feel sure that they’re going to stay better.”