Recovery Is Gaining Ground

From the Federal Reserve to Wall Street, there's a growing consensus that the economy is gaining strength. But a full recovery is still a long ways off. Some small-business owners are still feeling the impact of the financial crisis and the subsequent recession, Fed chief Ben Bernanke says the labor market remains very weak.

JPMorgan Chase's CEO Jamie Dimon reported Wednesday that the bank beat expectations during a strong fourth quarter and expressed optimism about the economy. "This could be the makings of a good recovery," he said, noting that the odds of a double-dip recession were fading.

On Wednesday, the Fed released its Beige Book, in which it said all 12 regions of its regions except St. Louis reported economic gains. The last report, in March, showed improvement in just nine regions.

However, Bernanke urged caution about the economy in his testimony Wednesday before Congress Joint Economic Committee.

While incoming economic data point toward a moderate recovery in coming quarters, Bernanke said that significant restraints on the pace of the recovery remain, including weakness in both residential and nonresidential construction and the poor fiscal condition of many state and local governments.

"If the pace of recovery is moderate, as I expect, a significant amount of time will be required to restore the 8.5 million jobs that were lost during the past two years," Bernanke told the committee.

Brian J. Fabbri, chief economist at BNP Paribas in New York, said that he was in Bernanke's camp.

"If we don't have substantial job growth over the next year, I think Jamie Dimon is going to be very upset, Fabbri said in an interview Wednesday. "We need job and income growth for the recovery to be sustainable, but right now both are looking relatively weak."

Keith Leggett, a senior economist at the American Bankers Association, said that Dimon and Bernanke were actually not that far apart in their stances, but their tone was more a question of nuance that spoke more of who comprised their audiences.

Dimon was speaking to investors, and so he spoke of how the company was going to see improvement in credit quality, earnings, and franchise value, which is very important to investors, Leggett said.

Bernanke was talking to lawmakers, and so he chose to emphasize headwinds such as the federal deficit, which need need to be tackled for the recovery to be truly sustainable, Leggett said.

Small-business owners were even more pessimistic, according to one survey released Tuesday by the National Federation of Independent Business.

The groups Index of Small Business Optimism lost 1.2 points in March, falling to 86.8. The persistence of index readings below 90 is unprecedented in survey history, the group said in its release.

The March reading is very low and headed in the wrong direction, Bill Dunkelberg, NFIB chief economist said in the release. "Something isn't sitting well with small-business owners. Poor sales and uncertainty continue to overwhelm any other good news about the economy."

"I can understand why small businesses are pessimistic," Fabbri said. "They really don't have good access to new credit, and therefore they have great difficulty expanding."

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