NBCNEWS.COM - The holiday shopping season was so busy at Balliets, a clothing store
in Oklahoma City, that owner Bob Benham had to ask his sales staff to
work extra hours to keep up with the pickup in foot traffic.
But with business now softening again in the new year, he's not convinced it's time to start hiring more full time workers yet.
"Our
customers are cautious," he said. "And that makes me cautious. I'm
keeping my inventories just about at year-ago levels. And in term of my
fall buying, which we're in the middle of now, I'm planning flat."
That kind of restraint is reflected in the government's latest employment report data.
Employers added some 265,000 workers last month, stronger than
forecasters had expected and an encouraging sign that the job market has
healed well enough to provide a steady supply of new jobs.
But the increased pace of hiring is still well below levels normally seen more than three years into an economic recovery.
With
roughly 150,000 new jobs needed every month just to keep up with
population growth, last month's relatively solid gains clipped the
unemployment rate by another two tenths of a point. But at 7.7 percent,
that's still painfully high.
"The strong showing in February is welcome," said Heidi Shierholz, an
economist with the Economic Policy Institute. "But given the jobs
deficit of 8.9 million jobs (from the 2007 recession), even at
February's growth rate we wouldn't get back to the pre-recession
unemployment rate until 2017."
Despite the relatively slow pace of
hiring, employers like Benham have been able to maintain, or even
expand, profits by keeping payrolls tight. As long as workers are
willing to pick up the added hours to keep up with the occasional uptick
in demand, employers have been able to keep their costs in check.
Benham's
uncertainty about businesses prospects this year is a direct reflection
of the level of circumspection he sees among his customers
"I
think people are just not sure of the future at this point, he said.
"They're just kind of waiting and seeing what's going to happen next."
It's not hard to see why.
For
one thing, the November election seems to have done little to break the
ongoing political gridlock over the federal budget that has seized the
government for more than two years. Consumers are just now absorbing the
combined impact of payroll tax hikes and looming cuts to the federal
budget
They're also still repairing the damage to their own
household budgets, and still recovering from the aftershock of the twin
collapse five years ago of the housing and stock markets. For the next
two years, American households watched in horror as more than $16
trillion in household wealth, along with nine million jobs, were wiped
away.
Now, two years after hitting bottom, households have gone a long way
to rebuilding their savings and paying down debt according to the latest quarterly report card
on household wealth by the Federal Reserve. Credit card debt has fallen
to levels last seen in 2006, before the bubble burst. Moreover, credit
card debt outstanding has been flat for the past two years, as consumers
have apparently put away their cards and avoided taking on new debt.
Helped
by record low mortgage rates, households have paid down their mortgages
by about $1 trillion since the 2007 peak. Rising home prices,
meanwhile, have help boost home equity by $1.6 billion since the 2009
trough. (That's still only about a quarter of what was lost after the
bubble burst.)
And the 20 percent gain in stock prices since last summer has further boosted household wealth.
But
the damage to consumer confidence lingers, according to a recent survey
of consumers' attitudes by Absolute Strategy Research, which advises
institutional investors.
Despite the improved wealth and signs the recovery is picking up
momentum, consumers have gotten even more cautious about their personal
finances in the last six months, said ABS research analyst Sarah
Franks.
"Here were are two years out and housing is great and the
Dow is up," she said. "But we still have so many people that are very,
very concerned about their debt levels – and in increasing numbers."
That
concern is reflected in the Fed's latest report on household wealth.
While households' financial strength continues to improve, consumers are
stashing more of their savings in safe havens like cash or Treasury
bonds.
"The fact that they have a lot of cash is a reflection of
their concerns about jobs prospects and the economy," said Paul
Edelstein, an economist with IHS Global Insight. "People are spending.
But except for a couple of big-ticket items, they're generally spending
out of their income. They don't want to run up a lot of credit card
debt."
That kind of frugality may be prudent in an uncertain
economy. But the widespread, lingering caution from consumers and
employers alike, more than three years after the Great Recession
officially ended, is now one of the biggest hurdles to a more robust
recovery.
Employers can't hire until consumers – who account for
more than two-thirds of the U.S. economy – begin to feel better about
spending. But that won't happen until employers pick up the pace of
hiring to create millions of new paychecks and pay higher wages for
those who already have one.
Until then, the slow, steady recovery will likely be limited largely to deeply-depressed sectors such as cars and housing
"Housing
is going to be a crucial driver of the recovery but what worries us is
that it's being called upon to do the heavy lifting," said Franks.
"We're not seeing this broaden out, and we're not seeing incomes rise."
