Signs are mounting that the U.S. economic recovery is losing steam as stimulus measures fade and companies remain reluctant to hire.
A collection of readings Thursday from diverse areas of the economy – housing, manufacturing, employment and construction – all reinforced the sense that the expansion of the world’s largest economy is decelerating in the face of considerable headwinds.
Most disappointing to economists was a thudding drop in pending home sales in May following the expiration of a tax credit aimed at first-time home buyers. Those sales fell 30 per cent from a month earlier, the largest such decline on record.
A gauge of U.S. manufacturing for June also fell slightly more than economists had predicted, though the reading still indicates that the sector is expanding.
Meanwhile, the number of people filing new claims for unemployment benefits rose unexpectedly last week, a sign of continuing stress in the labour market ahead of a key jobs figure due Friday. That report is expected to show that the unemployment rate edged higher in June.
Thursday’s data arrive at a sensitive juncture. The massive effort to stimulate the economy through government spending is on the wane, while efforts by business to restock inventories that were slashed in the recession are largely complete.
The majority of economists believe that the data simply point to more muted growth for the rest of the year and into 2011. Some experts, however, worry that that slower expansion could be a prelude to a double-dip recession.
Concerns over the vigour of the U.S. recovery, paired with ongoing weakness in Europe, have driven U.S. stocks to their lowest point for the year. The Dow Jones Industrials Average fell 10 per cent in the second quarter and dipped again on Thursday to 9732.53, its sixth straight decline. (Canadian markets were closed for the Canada Day holiday.)
