The service sector of the economy is growing -- barely -- in the most recent evidence that the economy is U-turning, even though the employment rate is still inching higher. More troubling is the fact that the service sector's recent growth comes on the back of incentives like Cash for Clunkers that have expired. It's a recovery, yes, but it's fragile and jobless and sad.
Federal Reserve efforts to unlock credit and government measures such as "cash-for-clunkers" and a tax credit for first-time homebuyers are reviving demand and likely helped the economy grow last quarter. Nonetheless, last week's report showing job cuts accelerated in September is a reminder that gains in purchases may not be sustained as incentives expire.
The Federal Reserve is already looking to cut back on its
mortgage-backed securities purchases and other credit programs; the
first-time home buyers tax credit expires in November; and Cash for
Clunkers was a two-week stimulus whose impact on the car market is
still being sorted through. The BBC
adds that an employer survey found many saying they wouldn't look to
rehire until January. So yeah, it's pretty much the worst recovery
ever. This is exactly why Congress should extend unemployment benefits,
and not just for some states.