Last week:  A second consecutive weak jobs report reflects concern that weak domestic economic conditions will not go away in the near future. Consumers remain cautious about spending, especially buying on credit. With demand soft, business is wary of hiring for several reasons. Chief among these is concern about cost. Companies have spent the last year sharply cutting costs. Adding relatively expensive labor in a weak economic environment is not a winning business strategy, especially with little prospect of quickly regaining pricing power, and slow productivity growth. This is especially true for small business, a significant segment of which is tied to the still struggling housing market. This is a description of an economy stuck in the slow lane, with little sign that it will break up soon.

THE SITUATION ABROAD

The world trade is improving. Merchandise exports were one-quarter higher in the second quarter of 2010 than one year earlier. Some parts of the global economic system saw even stronger export growth. For example, the CIS countries saw their exports rise by almost 50 percent — in part the result of strong exports of oil from Russia. Asian exports were 37.5 percent higher, a mix of finished goods and raw materials. Trade in the latter was driven up by the demand from recovering industrial activity across the globe. And therein lies the problem going forward. Industrial output is now moderating, after that earlier period of ramping up. Thus, shipments of raw materials are likely to moderate as well. Nevertheless, trade will continue to undergird the performance of the global economy, albeit at a moderate pace in the second half of 2010 than was achieved in the first half of this year.

FACT OF THE WEEK

61.1 percent versus 45.3 percent. The Conference Board has been surveying workers about job satisfaction for more than two decades. Not just any two decades. Job tenure has shortened and labor turnover has intensified. These are two of the factors in why satisfaction has fallen from 61.1 percent in 1987 to only 45.3 percent in 2009. And now job growth is disappointingly slow and wage growth is even slower. Is there any reason to think satisfaction has not fallen further? Is there any reason to doubt why consumer spending, especially on big-ticket items, is likely to remain weak — perhaps right through the holiday season?

QUESTION OF THE WEEK

A 5-to-6 percent U.S. saving rate is what prevailed in the late 1970s and into the 1980s. Why is a return to this level treated as a fundamental structural change – a kind of “new normal?”

Apples and oranges. True, the rate now is about what it was then. But today is not yesterday. For one thing, the saving rate back then was coming down to this range. Now it is moving up into this range. Second, consumers back then saved while inflation and interest rates were in the double digits — inflation eating away at the value of savings, while interest rates served as a hedge against such value erosion.

Today, interest on savings is sharply lower. And inflation was running close to 1.5 percent at the start of the year and slowed to only about 0.5 percent by mid-year. Thus, the pace of consumer saving, relative to inflation and interest rates, is much stronger now. This is producing something of the saving trap John Maynard Keynes warned about a century ago. Fear and caution are ramping up savings, depressing consumption, leading to slow production and employment growth, which in turn reinforces consumer caution. So although the saving rate looks the same as it did nearly three decades ago, it’s a very different picture.