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Unemployment could stay high as U.S. economy slows

Weak consumer spending held growth to an annual rate of just 1.5 percent, even less than the 2 percent rate in the first quarter.
By MARTIN CRUTSINGER Published: July 28, 2012
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High unemployment isn't going away — not as long as the economy grows as slowly as it did in the April-June quarter.

Weak consumer spending held growth to an annual rate of just 1.5 percent, even less than the 2 percent rate in the first quarter. Few expect the economy to accelerate in the second half of the year as Europe's financial woes and a U.S. budget crisis restrain businesses and consumers.

The growth estimate Friday from the Commerce Department suggested that the U.S. economy could be at risk of stalling three years after the recession ended. Economists generally say even 2 percent annual growth would add only about 90,000 jobs a month. That's too few to drive down the unemployment rate, which is stuck at 8.2 percent.

“The main takeaway from today's report, the specifics aside, is that the U.S. economy is barely growing,” said Dan Greenhaus, chief economic strategist at BTIG LLC. “It's no wonder the unemployment rate cannot move lower.”

Sal Guatieri, senior economist at BMO Capital Markets, expects the unemployment rate to end this year — and next year — at 8.3 percent. He said he foresees no decline in unemployment because of how tepid he thinks economic growth will remain: 2.2 percent for all of 2012 and 2 percent for 2013.

Some economic data improved over the course of the April-June quarter, while others worsened. Hiring, for example, rose slightly from April to May to June. But home sales weakened.

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