No hard evidence, but ugly signs, the recovery has stalled

Two years after Wall Street imploded and spawned a global economic meltdown, is the recovery now dead?

The ongoing misery of high unemployment, a dead real estate market, plunging consumer confidence, weak retail sales, and a flight from the stock market would indicate the answer is "yes."

But is that really the case?

It seems to depend on whom you ask.

"I don't think we were ever in a recovery mode," Jason Ravitz, vice president of retail operations at ShopRite Supermarkets of Cherry Hill, a five-store, family-run chain, said Wednesday.

Ravitz based his assertion on a statistic his family has kept for decades: the ratio of items sold that were advertised in the stores' weekly circular to the sales of regularly priced items. When times are tough, more people shop the sales. "People [now] are more price conscious," he said.

But economists and others keeping close tabs on the recovery said there was no hard evidence that the U.S. economy, which suffered its worst downturn since the 1930s, had gone into reverse or was likely to do so anytime soon - though the prevailing mood is undeniably sober.

The economy was hit by a massive heart attack in 2007 and 2008 and is now a patient in recovery, said Rex Macey, chief investment officer at Wilmington Trust Corp. "Like any patient," he said, "sometimes they show more improvement, sometimes less."

That tendency dampens confidence. But a weak, slow, and inconsistent rebound has been the prediction of economists all along.

Looming significantly and adding to the unease is the absence of an official declaration by the National Bureau of Economic Research that the recession that began in December 2007 has ended, though many economists say it ended a year ago.

What's more, a long list of ugly economic conditions gives the impression that the economy is stalled and ready to sink once more. They include persistently high unemployment, restrained consumer spending, weak state and municipal finances, a huge federal budget deficit, credit woes in Europe, and the slowdown or end of federal aid to certain segments of the economy.

While the performance of the stock market is not necessarily reflective of the state of the economy, the steady and steep drops in the Dow, S&P 500, and the Nasdaq add to the concern.

In a speech Wednesday in Wisconsin, President Obama defended his economic policies and said the economy was "headed in the right direction" despite high unemployment and depressed housing prices, two key factors in consumer confidence.

The Labor Department is expected to report Friday that unemployment rose to 9.8 percent in June from 9.7 percent in May, a Bloomberg News survey of 50 economists said. Figures from ADP Employer Services showed Wednesday that U.S. companies added fewer workers than forecast.

Amuneal Manufacturing Corp. in the Frankford section of Philadelphia hired three people this week, including two temporary workers who had been there for three months. It is a situation that illustrates how economic uncertainty plays out.

Chief executive officer Adam Kamens said his company, which designs and manufactures architectural metal work and custom store fixtures, as well as magnetic shielding for electronics, was very busy, even turning business away.

If it were four years ago, the company would be trying to hire everyone it could, given the workload, said Kamens, who employs now 75, down from 110 before the downturn. "Our success right now is based on the success of a few customers," he said.

So Kamens is concerned that the pipeline is not filling with new projects: "We need to be prepared for what could happen six months from now or four months from now," he said. "We need to be careful to not build up an infrastructure that we can't support if our volume should change, the way it has in the past."

Banker Thomas M. Petro gave a mixed view on the state of the recovery.

Petro, president and CEO of Fox Chase Bancorp Inc., of Hatboro, said a small group of executive recruiters he regularly touches base with had reported gains in recent days. "We wouldn't call it a bull market, but simply that there is an uptick in demand for placements," he said. "I tend to think that is a good sign."

But Petro said he did not see broader signs of improvement. "We think the recovery is tepid at best. We're not seeing things getting any worse, but they are certainly not getting any better."

Past economic recoveries were led by small business, but that is not happening now, Petro said. The region's economic improvement as reported by the Federal Reserve Bank of Philadelphia does not correspond to what Petro is seeing in his business customers.

Jeremy J. Siegel, a professor of finance at the Wharton School of the University of Pennsylvania, cautioned against reading too much into the decline in stocks and consumer confidence. "We don't have any spending indicators or manufacturing indicators that at all show a double dip," he said.

"The recovery might have paused for a moment," he said, but "this is not uncommon."