With talk of recovery in the United States filling the economic debate, it's important to ask what is meant by the term recovery. Semantics matter.
While technically, sputtering economic growth still qualifies as recovery, it won't feel like expansion without a few key measures showing growth. One of the most important statistics to watch is the rate of unemployment. Why? It's simple. A jobless recovery is a shallow recovery, tepid at best.
Without a growth in jobs, there will be less consumption, which will continue the spiraling effect of dampening economic activity. Business will expand less and no new jobs mean no new credit.
When economists project that the economy will likely be growing at a slower pace that's a code word for stagnation in the job sector. And with Asia and other areas of the world benefiting from a lower cost for labor, there will continue to be pressure on businesses to transition manufacturing facilities outside of the United States. A high standard of living is great for those who are working, but it can be an impediment to jobs growth in an established economy.
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Less jobs should not be a shocking condition. It stands to reason that if the economy is deleveraging, the United States unemployment rate will likely be closer on average to 6 percent rather than the 3 to 4 percent we have been accustomed to in the days of fantasy economic growth. Jobs deleveraging is real.
It's a fairly simple equation for economic recovery in the United States. Housing prices must stabilize and lending must begin again. And none of this will really take root unless jobs growth emerges. A 9.5 percent unemployment rate is a significant headwind and that number needs to come down dramatically for recovery to take hold.
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). Michael oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. He appears regularly on CNBC and CNBC Asia and can be reached directly at firstname.lastname@example.org.