Rising layoffs, falling home sales and slowing manufacturing activity are sparking fears that the economic recovery is headed for a springtime stall for the third year in a row.
New data Thursday provided fresh evidence that the job market is losing the momentum it built earlier this year, which could pressure fragile housing markets that have been showing signs of life. Separate reports this week suggested that the factory sector, a source of strength in the recovery, now is being hurt by weak growth overseas.
However, recent signals have been mixed, with worrisome indicators following positive ones — such as consumer confidence and auto sales — that suggest the recovery remains on track. Economists generally believe total economic output in the first three months of the year grew at a rate a bit above 2%– slower than at the end of 2011 but significantly stronger than the same period a year ago.
‘It’s been the weakest recovery in the post-World War II period, and that hasn’t changed,’ said David Rosenberg, chief economist for investment firm Gluskin Sheff.
New claims for unemployment benefits ticked down last week to 386,000 from 388,000 the week before, the Labor Department said Thursday. But those figures have been repeatedly raised in recent weeks, suggesting that the final number could be higher — and well above the 361,000 notched in mid-February. The less-volatile four-week average rose for the fifth time in seven weeks, a sign that layoffs are increasing again after approaching a four-year low earlier this year.
Economists cautioned that a range of factors, from a historically warm winter to an early Easter, have muddied the weekly figures and made it difficult to identify clear trends.
Nonetheless, the recent figures, combined with an unexpectedly weak March jobs report, suggest the job market is cooling. ‘It adds to concern about backsliding in job creation after faster employment gains earlier in the year,’ Credit Suisse economist Jonathan Basile wrote in a note to clients.
Hardin Optical is among the companies that are cutting back. The Bandon, Ore., maker of face plates for night-vision goggles, among other equipment, has laid off about a third of its work force, which once approached 100, amid military budget cuts.
‘Our main customer is just seeing less work through the government, and that trickles down to us,’ said Michael Hardin, general manager, adding that the company’s efforts to diversify its business have yet to pay off.
The housing market continues to bump along the bottom. Sales of previously owned homes fell 2.6% in March from February, according to the National Association of Realtors, meaning that the rise in buyer traffic during the mild winter hasn’t yet translated into strong sales gains.
But sales were still 5.2% above last year’s levels, fueling the strongest first quarter for home sales since 2007, when the housing bubble was deflating.
In recent months, home-sales gains have been driven largely by investors paying cash. The Realtors’ survey indicated that investor activity had pulled back in March, which could explain the unexpected easing in sales.
The number of traditional buyers making purchases ‘hasn’t really changed for the last six months,’ said economist Patrick Newport of IHS Global Insight.
Sales remain sluggish in part because many buyers don’t have enough cash for a down payment or can’t qualify for a loan, despite the fact that mortgage rates have fallen to near-record lows, making housing cheap in many markets.
Meanwhile, sellers are holding their homes off the market, which is leaving many housing markets with a shortage of properties for sale at a time when there are more buyers looking. ‘Buyers have come out early, but sellers haven’t,’ said Mark Vitner, senior economist at Wells Fargo & Co.
Housing isn’t likely to recover until the job market does, said Doug Duncan, chief economist at Fannie Mae. ‘We have a lot of households that are holding back, and until we get job growth, they’re not going to unfold,’ Mr. Duncan said.
The manufacturing sector also is showing signs of cooling. Factory output slipped in March after rising a month earlier.
Surveys from Federal Reserve banks in Philadelphia and New York this week showed manufacturing in those regions slowed in April. Economists said a likely recession in Europe and slowing growth in China could be hurting demand for U.S. products overseas.
The weak reports in manufacturing, housing and jobs have revived fears that the economy could repeat the pattern of the past two years, when growth picked up early in the year only to slow sharply in the spring.
But economists also noted important differences between this year and last. Oil prices, which were among the factors behind last year’s stall, have moderated in recent weeks. The European debt crisis, though still a risk, hasn’t surged to critical levels. And the world hasn’t seen a repeat of the natural disasters that disrupted global supply chains last year.
Moreover, some aspects of the economy still seem to be improving. Retail and auto sales have posted two months of strong gains, and consumer confidence hasn’t been hit by high gasoline prices. Households are continuing to work out from under the debt burden accrued before the recession, and companies have trillions of dollars in cash to help them weather any slowdown.
‘The whole economy’s on better footing,’ said Paul Dales, an economist for research firm Capital Analytics. ‘I just don’t think we’re going to see a full-on collapse in growth.’
Chris Lawson, who runs a staffing firm in the Dallas area, said business has been up in recent months as employers have finally gained the confidence to start hiring.
Recent signs of weakness in the jobs market haven’t damped clients’ enthusiasm, he said.
‘It’s a slow, gradual process, where we might have some steps forward and some steps back,’ Mr. Lawson said. ‘But the vibe and the pulse that I get is that companies are hiring.’