U.S. Recovery Isn’t Recovering Fast Enough Says Wells Fargo’s (NYSE: WFC) Silvia
The U.S. economy isn’t recovering fast enough to restore the level of jobs seen before the recession started in December 2007, said John Silvia, chief economist at Wells Fargo & Company (WFC).
In an interview with Tom Keene on “Bloomberg Surveillance,” Silvia spoke from Charlotte North Carolina about the second quarter GDP numbers released earlier in the day.
“This is an economic recovery that doesn’t measure up to the traditional standards of the traditional post-World War II recovery,” remarked Silvia. “We don’t have the rebound in manufacturing jobs or domestic jobs, especially in the service sector, that we traditionally have.”
Total non-farm private employment stood at a seasonally adjusted 107.7 million in June, down 7.9 million from December 2007, according to the Bureau of Labor Statistics.
Growth in the U.S. slowed to a 2.4 percent annual rate in the second quarter, less than forecast, reflecting a larger trade deficit and an easing in consumer spending, the Commerce Department reported today in Washington.
“Even at 2.5 percent growth, that’s not a fast enough pace of growth to generate the jobs or generate the new housing or to pay off all these entitlements that people have come to expect as the quote, ‘old normal,’ for the U.S.,” said Silvia, 61, who works at the company’s Wells Fargo Securities unit.
There have been gains in spending on business equipment and software, Silvia said, and consumer activity has improved though the market for commercial real estate remains weak.
Entrepreneurs and small businesses are increasingly seeing the potential for higher rates of return on ventures outside of the U.S., Silvia said. “America’s still growing and still a great country but in terms of opportunities, we can look elsewhere,” he said.
Silva’s remarks echo the latest survey released by Wells Fargo/Gallup Small Business Index that shows, although their concerns about credit availability have stabilized, fewer U.S. small business owners expect revenues, cash flow, capital spending and hiring to increase over the next 12 months.
“The weakened economy has been particularly hard on small businesses and our bankers are making every effort to help them through this period with financial solutions and guidance,” said Marc Bernstein, executive vice president and Wells Fargo’s head of Small Business. “We grew small business lending by 30 percent over the previous quarter and — in an effort to increase approvals — took a ‘second look’ at declined applications, while continuing to apply our disciplined credit and underwriting principles.”
“Slower consumer spending growth appears to be weighing on small business confidence,” added Dr. Scott Anderson, Wells Fargo senior economist. “Small businesses are scaling back on hiring and capital spending plans in the third quarter and remain concerned about the overall financial health of their companies.”
The Index is the sum of “present situation” and “future expectations” of small business owners for six key measures, including financial situation, cash flow, revenues, capital allocation spending, job hiring and credit availability.
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