American consumers are still unwilling to really spend money and that's the main reason the economy has not recovered faster, influential economist Stephen Roach told CNBC on Wednesday.
"We've been in a balance sheet recession, and we're still in it. That's the bottom line," Roach said. "The big story in this recovery that's holding us back is the 1.5 percent consumption growth we've been on for seven years plus."
In a balance sheet recession, consumer spending is put on the backburner in favor of saving and paying down debt.
"Consumers were battered by a levered asset bubble, sounds like China, and they have yet to fully recover," Roach said on CNBC's "Squawk Box." If the unemployment rate really reflected the jobs situation, he said, "we'd have consumption growth tracking at 3 percent to 3.5 percent."
The government earlier this month said nonfarm payrolls increased a slightly weaker-than-expected 223,000 in June. The unemployment rate ticked lower to 5.3 percent. The July jobs report is out Aug. 7, about five weeks before the September meeting of the Federal Reserve's policymaking committee.
The Fed concludes its two-day July meeting Wednesday afternoon, with the release of its policy statement. No interest rate increase is expected this time, but investors will be looking for clues on whether the first rate hike in nine years might happen in September or December.