Even though the unemployment rate edged downward in last week's jobs report, an economic recovery is not yet underway, said Olivier Garret, CEO Of investment consulting firm Casey Research.

In an interview with CNBC.com, Garret does not expect that there can be a solid economic recovery until there are signs that profits will return to companies based on sales, not cost cuts, and that more jobs are on the way.

"Where are the jobs going to be created going forward?" Garret asked. "Entire segments of the economy don't exist, or are completely outsourced. It would take years, at best, to bring those jobs back to the U.S."

Not only does Garret expect job growth will be hampered by employer expectations that taxes and interest rates will be on the rise, he expects unemployment will hit 12 percent next year.

Still, Garret is not surprised by the sudden burst of optimism among some investors as the stock market has recovered lost ground and economic conditions have stabilized for the moment. However, he points out that much of the perceived improvement is based on expectations that were formed in the midst of the economic crisis or that are the result of growth created by the influx of government stimulus money.

According to Garret, these factors have created the appearance of an economy that is regaining activity, but "it can only go so far."

The real proof may be ahead of us in how retailers fare in the holiday season.

"Most consumers have seen their lines of credit curtailed or shut down," he said. "Credit card companies are increasing their rates and their monthly payments are increasing."

As a result, Garret expects that we will not see a healthy holiday season for retailers, and at the end of the holiday season, it will be very tough.

"Consumers will stay home when it gets closer to the holidays," he said.

According to Garret, this is a typical bear market recovery and we are in middle leg of a W-shaped recession.

"We are in the eye in the middle of the storm," he said. To back his view, he cited what he sees as a "very unhealthy" banking sector, a residential and commericial real estate market that is in "very tough shape," and "very vast sectors" of the economy that are run by the government.

"The quicker the government bubble bursts, the faster the recovery will be," he said.

More from Consumer Nation:

• Target Hits the City Streets With 'To Go' Gifts
• Are These Holiday Gifts Stupid or Cool?
• Are Bad Holiday Gifts Ruining the Economy

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