The baton is passing. That's the way Fed Chairman Ben Bernanke describes the recovery's transition.
Instead of being stimulus-driven, economic growth is increasingly being powered by the private sector.
Unfortunately, the private sector doesn't look particularly robust right now, especially on the jobs front.
The latest evidence comes from initial claims for unemployment benefits, released Thursday. It showed a barely perceptible drop: just 3,000 fewer Americans applied for first time unemployment benefits last week compared with the week before. With the previous week's figure revised upward, the closely watched four-week average actually rose to 463,000, its fourth increase in a row. Last month, the private sector created only 41,000 jobs.
Add in jitters about the European debt crisis, the downdraft on energy stocks from the BP oil spill, falling housing values, and a grim outlook for commercial real estate and it should come as no big surprise that the stock market has plunged nearly 12 percent in a month and a half. Fears of a double-dip recession have grown.
But are things really that bad?
The economy is still growing. Production is expanding. Exports are up. Consumers are paring down debt and still managing to spend, which is supporting retail sales.
On Wednesday, the Federal Reserve issued its most upbeat Beige Book, a periodic survey of regional economic conditions, in more than two years: "Economic activity continued to improve since the last report across all twelve Federal Reserve Districts, although many Districts described the pace of growth as 'modest.'" (Click on the map above.)
Private-sector employment is also growing, despite May's awful numbers. After hitting an 11-year low in December, the private sector has added an average of 99,000 jobs a month.That's just about enough jobs to keep up with the natural increase in the labor force but not enough to reduce unemployment.
Thus, the real challenge is not the lack of growth, it's the speed of growth.
"Private final demand is taking the baton," Mr. Bernanke told the House Budget Committee in testimony Wednesday. "We see at this point a moderate recovery. [It's] not as fast as we would like."
Now that the private sector has the baton, America needs to see it pick up the pace.