SACRAMENTO — Fears of a double-dip recession have gripped Wall Street and Main Street for weeks, and Friday's unemployment news surely didn't help: The nation lost 125,000 jobs in June as layoffs at the Census Bureau overwhelmed so-so hiring in the private sector.
The government said unemployment fell two-tenths of a point — to 9.5 percent. But the reason was that 650,000 Americans stopped looking for work and were no longer counted among the jobless.
Still, analysts said another bout of recession isn't likely. Rather, they said, the economy is still recovering. But the upturn is so weak — held back by a troubled housing market, Europe's debt problems and other issues — that job creation has slowed to a crawl.
That could put renewed pressure on the Obama administration and Congress to craft another stimulus plan.
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"Economists would be careless to completely rule out a double-dip recession, (but) I do believe that slow recovery is the most likely scenario," said economist David Smith of Pepperdine University. "It's not going to be slow and steady — it's going to be some months speeding forward and other months sputtering." What that means for Sacramento isn't encouraging. While the state and local unemployment figures for June won't come out for another two weeks, grim news is piling up. Hours after the national figures came out, an appeals court ruled that Gov. Schwarzenegger can go ahead with his plan to cut most state workers' pay to the federal minimum wage of $7.25 an hour.
While Democrats and labor leaders called Schwarzenegger's move a ploy to pressure unions into concessions, it's increasingly clear there's pain in store for Sacramento.
"However the budget resolution shakes out, it's going to have a negative impact on the Sacramento area," said Jeff Michael, director of the Business Forecasting Center at the University of the Pacific in Stockton.
The region's unemployment rate in May was 12 percent.
Smith, Michael and other economists said the latest job figures offer more evidence that the federal government should enact another stimulus plan — albeit one smaller than the $860 billion package that's still being spent. Mi- chael said Congress at least should end the impasse that has blocked an extension of unemployment benefits for more than 1 million Americans.
"The Obama administration has to think about a targeted stimulus program," said Sun Wong Sohn, a former Wells Fargo chief economist who teaches at California State University, Channel Islands, in Camarillo.
Obama acknowledged the slow pace of recovery in remarks to reporters, saying, "We're not headed there fast enough for a lot of Americans. We're not headed there fast enough for me, either." In June, the private sector added just 83,000 jobs; analysts had forecast 110,000. The hiring was more than offset by public-sector losses, particularly 225,000 Census Bureau layoffs.
Dow keeps dropping
The numbers reinforced the notion among many that the recovery is losing momentum. Sohn said the drop in the Dow Jones average is hurting consumer confidence. The Dow lost another 46.05 points Friday to close at 9,686.48 — a 13 percent drop since late April.
"People are really, really holding onto their money for new appliance purchases," said Jean Hawkins, co-owner of Valley Oak Home Appliance Center in Elk Grove.
Business is "a little better than last year, but we're certainly not back to where we were at the 2006, 2007 level," she said.
California's budget problems, and the economy in general, are causing ripple effects throughout the region. School districts and local redevelopment agencies have had to cut back, forcing layoffs and creating other headaches.
Such cutbacks forced the closure earlier this week of Bridges Behavioral Language Systems Inc., a 12-year-old Citrus Heights firm that provided therapy to autistic children. The firm laid off 100 workers.
Program director Audrey Gifford blamed cuts by school districts and other agencies, which provided most of Bridges' funding.
"The funding not only dried up; the rates kept on going down and down," she said. "It became more difficult to pay people.
"The (school) districts are running on nothing," she added.
There's no official definition of a double-dip recession, although most economists call it a period in which the economy recovers for a while but then starts shrinking again for at least a few months. Many experts believe the economy double-dipped in 1980 and 1981.
Sohn said he doubts the current recovery will turn into a double-dip. But he's convinced the housing sector is headed there.
Nationwide housing starts fell 17 percent in May compared with April, and new-home sales fell to their lowest level on record.
The Sacramento market seems healthier. Housing starts in the region jumped 10 percent in May, and sale prices in Sacramento County have risen for five straight months.
But Michael said the recovery in the California construction market is "still very slow," and 2010 will go down as one of the worst years on record.
He said the recent flurry of bad news has stunned many economists. Just a couple of months ago, conventional wisdom was that the recovery was beginning to take flight.
"I'm not ready to give up on that projection yet, but there's some signs of concern here," he said.