WASHINGTON/NEW YORK (Reuters) - Not everyone is lamenting a weak recovery that again looks to be running out of steam.
For managers at Wal-Mart Stores Inc. (WMT.N), the jobless rebound has made it easier to hire qualified employees -- and enabled the company to work them a little harder.
Yet this benign environment is unlikely to last if consumers’ buying power is sufficiently dented that it begins to bite back at businesses.
U.S. employment figures for May released on Friday were unequivocally dismal. The economy added a paltry 54,000 jobs last month, far below what is needed to keep up with population growth. The jobless rate also climbed, to 9.1 percent.
For some large corporations this has actually boosted their ability to attract great workers.
“People are thankful to have good jobs ... and are working much more efficiently,” said Bill Simon, president and CEO of Walmart U.S., the box-store discount retailer. “Labor productivity has been phenomenal.”
The flipside of that of course is that 14 million Americans who are actively looking for a job are unable to find one.
For smaller businesses that depend on the financial well-being of their customers in order to make a profit, the damage to household balance sheets has been difficult to shrug off.
“We’ve been in business for 37 years and survived five recessions,” said Frank Goodnight, president of Diversified Graphics, a commercial printer and publisher in Salisbury, North Carolina.
“This recession will be equal to all five put together plus about double. And we don’t think it’s really going to turn around in another year.”
Economic malaise has remained a part of the business landscape since the United States officially emerged from recession in the summer of 2009. The latest bout of weakness has caught economic forecasters off guard.
JP Morgan’s economics team was forced to revise down its forecasts for second-quarter economic growth twice -- and substantially -- in the span of a few days.
The bank now sees gross domestic product expanding just 2 percent in the April to June period, down from an original forecast of 3 percent and barely higher than the first quarter’s disappointing 1.8 percent clip.
“The problem with a ‘soft patch’ in the economy is that you don’t get two of them in the first two years of a normal recovery,” said David Rosenberg, chief economist at Gluskin Sheff.
Most Wall Street economists are still counting on a second-half rebound.
“Despite the near-term sogginess in activity, we still expect growth to average around 3 percent to 3.5 percent in the final six months of 2011,” said Thomas Lam, chief economist at OSK-DMG. “An important strand behind our second-half growth assumption is that financial market conditions must remain supportive.”
That’s a pretty big assumption given a combination of a sagging U.S. stock market and ongoing debt troubles in Europe. The disappointing jobs report only added another element of concern to the already dour outlook.
Median estimates in a Reuters poll of economists point to growth around 2.7 percent for this year. Federal Reserve officials are even more optimistic, seeing growth in a range between 3.1 percent and 3.3 percent for the year.
Not all the news is bad. Many businesses are optimistic that, while growth may be tepid, things do not appear to be getting substantially worse.
There is also a sense that credit, long hampered by post-crisis jitters, is finally beginning to flow again.
“Credit is increasingly available and more businesses, large and small, want loans,” JPMorgan Chief Executive Jamie Dimon said on Thursday.
3M CEO (MMM.N) George Buckley said the maker of products ranging from Post-it stickers to dental implants was seeing “a little bit of softening in the consumer area” consistent with its forecast the second-quarter would be the weakest of the year, partly because of effects from Japan’s March earthquake and tsunami.
“We’re in the so-far, so-good category,” Buckley told an investor conference. “We expected the second quarter to be the worst of the year and I think that’s what we’re experiencing.”
After leading the economy out of its slump last year, the slowdown in manufacturing growth the last three months has been particularly disheartening. The Institute for Supply Management’s manufacturing index plunged in May, sending another jolt of nervousness through financial markets.
With consumer demand still shaky, businesses are trying to strike the right balance. Manufacturers are wary of being stuck with too much inventory -- or staff -- but also don’t want to be caught off-guard if demand does pick up.
“The plank they’re navigating is not wide,” said Rich Bergmann, global lead at consulting firm Accenture’s manufacturing group. “People are being conservative. They’re not betting the farm, they’re not building $400 million manufacturing facilities, but they are looking to hire more people and (employ) better technology.”.
Additional reporting by Jessica Wohl, Nick Zieminski, David Henry and Dhanya Skariachan; Editing by Andrew Hay