'Main Street Is Still Suffering'
What we've seen is another disappointment in unemployment claims, in part because of the Easter holiday and extended spring break vacations around that. When people go on vacation and they don't spend money at restaurants and the usual places they go to, the people that work there are unfortunately casualties. The good news is that this means the numbers should be better next week, but it's bad news because it shows the economy is still so weak that you see an increase in unemployment claims just because we've had a spring break.
Although there's some bright lights, the economy is clearly far from running on all cylinders. And the most important economic engine is jobs. Part of the reason we're seeing Wall Street coming back so much faster than Main Street is that Main Street is still suffering. People are finding it very difficult to find jobs, especially the long-term unemployed. We now have 6.5 million people who have been out of work longer than 6 months, and we've lost 8.5 million jobs since the start of recession -- those are just unprecedented numbers.
Hiring Returns, But Slowly
There's still a reluctance to hire, although the good news is that firing has abated. And on the margins, we are seeing companies hiring more consultants and temporary workers. Although we are starting to see announcements from companies like J.P. Morgan and Intel that they're going to increase hiring now because they have enough profits to make that commitment. That's an important step towards more permanent hires, but it's a slow and arduous process.
Ben Bernanke's Caution Justified
We've seen many small business surveys that say they're still not hiring, and small business is where the bulk of our job generation and creation has been. So there's still reluctance to commit to full-time hiring. We're on our way, but this recovery is starting to get old and we'd like to see a little more action on the job front. And that's why Ben Bernanke remains so concerned that the Fed not do anything to derail what little strength we have.
I absolutely agree with his caution -- we're seeing a lot of bright lights in the economy but not enough to illuminate Main Street, which needs jobs. As the economy comes back, we still have lots of challenges -- and real estate is one of the biggest. The housing market fell back again at the start of the year, after improving in the second half of 2009. And the fact that the largest asset for many people, their homes, is deteriorating, is a pivotal issue for them and for the overall economy. It doesn't help that much that Wall Street is doing OK because most people's 401(k)s just don't compare to their homes in terms of long-term savings and assets.
'Financial Reform Isn't Health Care Reform'
I'm confident that we will actually come up with financial reform that's bipartisan, which is almost unheard of. We're seeing a lot of noise right now around financial reform, but the bills that are being proposed and their differences are not insurmountable -- this isn't health care reform. I think they will get something done before the spring is over. The bad news is it still doesn't deal with the fundamental issue, which is the underwriting of mortgages and how do we do that. That is still not going to be highly regulated. And so there are a lot of small thorny issues, but they're like thorns on a rose -- you can cut them off. And I think we will get to a financial reform bill that will be far from perfect, but it will be a start.
And we do need to start so that the financial services industry has some sense of where they're going to make their next bets. Because until they know the rules of the game, they won't play. And that's really important because whether you like it or not, we need big banks and financial services firms operating for the economy to move forward.
Diane Swonk, chief economist at Mesirow Financial, talks to CBS MoneyWatch twice a week about the day's top economic news and developments. Her responses are edited for clarity and length.