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Slow-motion recovery extends jobless pain for many

As the economy gradually improves, once-dormant construction projects, such as this one in New York, are starting up again. But real estate remains a weak spot for the economy, as builders cut spending by double digits in the first quarter.

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As the economy gradually improves, once-dormant construction projects, such as this one in New York, are starting up again. But real estate remains a weak spot for the economy, as builders cut spending by double digits in the first quarter.

WASHINGTON — High unemployment isn't going away.

The slow pace of economic growth shows the recovery is too weak to generate enough jobs for 15.3 million unemployed people. Layoffs are contributing to the problem. That's evident from an elevated number of weekly claims for jobless aid.

Two government reports Thursday offered new evidence on all those fronts.

For many Americans, it doesn't feel much like a recovery.

The unemployed face fierce competition for job openings. Those with jobs are watching their paychecks shrink. A growing number of people are at risk of falling into foreclosure. And only people with the most stellar credit are likely to get a new loan.

"We're out of recession, but the recovery is not going to bring a whole lot of smiles," said Joel Naroff, of Naroff Economic Advisors.

The economy grew at a 3 percent annual rate from January to March, according to a new estimate released by the Commerce Department on Thursday. The new reading, based on more complete information, was slightly weaker than an initial estimate of 3.2 percent a month ago.

Consumers spent less than first estimated. Same goes for business spending on equipment and software. And the nation's trade deficit was a bigger drag on economic activity. Those factors led to slower growth last quarter than first estimated.

In a separate report, the Labor Department said the number of newly laid-off workers filing claims for unemployment benefits fell to 460,000 last week. But the latest level of claims is actually higher than it was at the start of the year.

By this point in the recovery, economists had hoped claims would be in the 400,000 to 425,000 range. That would signal more robust job growth was on the way.

The economy did add a net 290,000 jobs in April, the most in four years. But much stronger job growth is needed to drive down the 9.9 percent unemployment rate.

During normal times, expansion in the 3 percent range would be considered healthy for the U.S. economy. But the country is coming out the worst recession since the Great Depression. So growth needs to be stronger — two or three times the current pace— to make a dent in the jobless rate.

Economists say it takes about 3 percent growth to create enough jobs just to keep up with the population increase. It would have to be about 5 percent for a full year just to drive the unemployment rate down 1 percentage point.

After the last severe recession in the early 1980s, GDP grew at rates of 7 to 9 percent for five straight quarters and the unemployment rate dropped from 10.8 to 7.2 percent in 18 months.

Economists don't see that happening this year.

The National Association for Business Economics predicts moderate economic quarterly growth in the 3 percent range through the rest of this year.

The outlook means employers won't feel comfortable about bulking up their work forces.

Housing and commercial real estate are major weak spots for the economy.

Builders cut spending in each by double digits in the first quarter.

Christina Romer, head of the White House Council of Economic Advisers, said in Paris on Thursday that it would be a mistake for the United States to rapidly wind down stimulus measures.

Her comments come as federal legislators are at odds over a long-term extension of unemployment benefits. Democrats would like to pass the emergency spending measure before they go on vacation next week. But Republicans and conservative Democrats are pushing back over the price tag.

Recovery by the numbers

3 percent: Revised U.S. gross domestic product growth in 2010's first quarter, down from an original estimate of 3.2 percent. Growth

of at least 5 percent for a full year is needed to drive down unemployment, now at 9.9 percent nationally.

460,000: Number of newly unemployed applying for unemployment insurance last week. Economists say the figure needs to be in the 400,000-425,000 range to make significant inroads on the jobless rate.

Slow-motion recovery extends jobless pain for many 05/27/10 [Last modified: Thursday, May 27, 2010 10:34pm]
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