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I'm going to take a few hits myself for putting "recovery" in quotation marks in that headline. I mean, really, am I trying to do the Republicans' work for them? What's with all the doom-and-gloom just three months before the mid-term elections?

It's called reality. And, no, I'm not trying to help the Republicans. The last thing we need are more of them doing their best to make life even harder on the bottom 80 percent of the population, pushing austerity on everybody but their well-to-do cronies, telling out-of-work people to get off unemployment benefits (if they are lucky enough to have them) and find one of those jobs they seem to think are plentiful if all the lazybones would just get off their duffs and look for them.

Nobody needs remind me of how much worse things would be if President McCain and Vice President Palin were running the show. I know. If there had been no stimulus, another 2 million or 3 million Americans would be counted in the unemployment statistics right now. This is not irrelevant. Americans need to hear this and hear it often in the run-up to November.

However, telling people - whose confidence in the economy has plunged - that things could be worse is terrible messaging. Not because it's untrue. But rather because, when you're out of work, or soon expect to be, or are just worried because the situation seems so unstable, having somebody say things could be worse amounts to a slap in the face. And telling them - as many Democrats are doing in variety of ways, directly and indirectly - that immediately controlling deficits matters as much or more than speeding up economic growth is like a punch in the nose.

When you combine a slap and a punch to the voters with what's coming out in the most recent statistics, it could easily amount to an uppercut from the voters for many congressional Democrats come November.

Take a look at the numbers.

Back in March and April, the acute problems with the economy appeared to be improving. There were a plethora of upbeat statistics about jobs, retail sales, manufacturing, the service industry and other indicators that the nation was digging its way steadily out of the mess that officially began in December 2007, but actually began many months earlier. While we "doom-and-gloomers" were still wary, pointing to pitfalls along the path, there were glimmers of spring sunshine that couldn't be denied even if they weren't exactly dazzling, especially on the job front.

Since then, much of the news has taken a different direction. As I noted here, we're seeing widespread pronouncements of an economy of tepid growth, slowed growth, a retreat in growth (double dip recession), or a third depression. No good options on that list.

This week, frankly, the news got fairly nasty.

Start out with the minutes from the Federal Open Market Committee of their June meeting. The participants still said the economy is steadily growing. They rejected the idea of a double dip. But they predicted a slowdown. And they adjusted their previous prediction of 3.2%-3.7% GDP growth for the whole year to 3.0%-3.5%. Given that the first quarter GDP has been twice revised downward, and now is calculated at 2.7%, that reduction would seem reasonable, assuming that the other statistics we're hearing about don't keep trending the way they have been. But that's a big assumption.

The prediction range for 2010 2011 was also rejiggered: higher for unemployment and lower for GDP. You can read the minutes for yourself and decide whether to be optimistic or otherwise.

Consumers in general went the pessimistic route. In the monthly survey from the University of Michigan released Friday, consumer sentiment went to its lowest levels in nearly a year, way lower than the modest drop the consensus of economists had predicted, 66.5 compared with 76.0 in June. That followed on the fall in the Conference Board's gauge of consumer confidence.

"Income and job prospects were extraordinarily weak and those bleak prospects have made consumers much more cautious spenders," Richard Curtin, director of the surveys, said in a statement.

But that was not all.

The Conference Board reported in Imminent Growth Slowdown in the United States is an Increasing Factor: "GDP growth for the second quarter, which just ended, might turn out to be the highest for the year, and even here there is a downside risk of the consumer data coming in lower than currently forecasted, despite an uptick in April (and March)." In other words, the Fed's lowered predictions might not have been lowered enough, and the second quarter might be in the same range as the first.

The fall in consumer optimism quite likely lies behind the fact that seasonally adjusted retail sales fell in June, according to the Census. At 0.5%, the drop was worse than expected. And it came atop a revised 1.1% drop in May. Retail sales are well above last year at this time, but last year was disastrous, and sales are still far below their peak when the recession began. This is especially bad news for jobs since 70% of the economy is driven by consumers. If they aren't buying products that retailers are selling, retailers aren't buying stuff manufacturers are making. That means fewer new hires at stores and factories.

Consumers weren't the only ones turning more pessimistic. The National Federation of Independent Businesses reported that the Index of Small Business Optimism fell 3.2 points to 89. That number has been below 93 for 30 months, and below 90 for 23 of those months.

"The U.S. economy faces hurricane force headwinds and the government is at the center of the storm, making an economic recovery very difficult," said William Dunkelberg, NFIB’s chief economist. ... "Hiring and capital spending depend on expectations for growth in future sales, so the outlook for improved spending and hiring is not good."

What's the problem? Not enough customers. This is particularly worrisome since small business is the traditional engine of growth after a recession. But not now.

Some buying is going on. But the consequences aren't so great. Imports at the ports of Los Angeles and Long Beach (Calif.) were up 1% over June 2008. But exports were down 13%. To be fair, these particular numbers are what statisticians call "noisy," meaning that many factors can distort them on a monthly base and trends over many months must be looked at even more than in the case of other economic numbers. But combine these June numbers with the fact that the trade deficit went up in May and we've got an omen of a full-blown return of a structural problem that's plagued the country for years.

Seasonally adjusted rail traffic clocked in weaker in June for the second monthly decline after 10 months of growth from the trough in May 2009. In a recovering economy, rail traffic ought to be trending upward. It's still more than 10% less than in 2008, and lower still than it was in 2006-2007, and dipping.

And then there was the 1.9% drop in June for the Ceridian Pulse of Commerce Index, which is a measure of diesel fuel consumption data from over-the-road trucking. A bit noisy, too, according to a PCI economist, and weaker at the beginning of the month than the end. However:

On a quarterly scale, the PCI grew 6.2 percent during the second quarter 2010, down from previous periods. The weaker PCI number suggests a Q2 GDP growth rate of only 2.5 percent, which is a positive number but not significant enough to put the unemployed back to work.

Other indications of a slowing economy:

• The "Empire State Manufacturing Survey indicates that while conditions for New York manufacturers continued to improve in July, the pace of growth in business activity slowed substantially over the month."

• The Philly Fed Index suggests "that regional manufacturing activity continues to expand in July but has slowed over the past two months. Surveyed firms reported a decline in new orders this month compared with June."

• The Fed'sIndustrial production and Capacity Utilization: "At 92.5 percent of its 2007 average, total industrial production in June was 8.2 percent above its year-earlier level. The capacity utilization rate for total industry remained unchanged in June at 74.1 percent, a rate 5.9 percentage points above the rate from a year earlier but 6.5 percentage points below its average from 1972 to 2009."

• Initial claims for unemployment benefits fell to the lowest level in two years - a good thing - but the numbers have remained within a narrow range above 425,000 for eight months.

Cheerleading and sugarcoating will not change these numbers in any way. We likely will face slower growth the second half of this year, which means those half million jobs a month that Vice President Joe Biden said we were soon going to be seeing are just not going to be there. And that's going to hurt big time.

I'm not in the prediction game. I don't know how rough things are going to be for the Democrats in the elections this year. I can tell you that there are quite a few who I'd like to see back in the private sector. But frustrated, fed-up, riled-up and pissed-off as many Democrats have made me over the years, I know all too well what it means if they're replaced by Republicans.

So, I'm going to offer some advice both to those elected Democrats who I think have the best interests of rank-and-file Americans at heart and those who I think are corrupt, opportunist sleazeballs who I'd never turn my eyes away from if my wallet was on the floor halfway between me and them: Keeping your job and the jobs of your colleagues on the left - haha - side of the aisle in Congress this year means coming up with a vision for putting Americans back to work and hammering away on that vision from now until election day.

The White House could help with this. A good first step would be to put Alan Simpson's deficit-busting "catfood" commission on a six-month hiatus. Send Simpson home until January at least. A second would be to nominate and fight for the appointment of Elizabeth Warren to the consumer protection board that was her idea in the first place. A third would be to announce a plan to keep employed the half million (or more) public workers who face layoffs because of revenue shortfalls in the states. And, finally, to announce a modern version of the CCC and WPA, with direct hiring by the government.

The latter, of course, would be shouted down. It would surely elicit cries of national socialism from, ironically, the fascist Glenn Beck and his toadies across the land on hate radio. And, indeed, such a proposal has almost no chance of getting through Congress as currently constituted, although it might have in February 2009. But its likely defeat is no reason not to propose it. Indeed, the White House and congressional Democrats should make it the economic centerpiece of the 2010 campaign.

The 30 million or so unemployed and underemployed Americans, and the millions more who fear they could themselves be added to these ranks, would get a positive message, and one that could boost the level of voter intensity which has so far been as tepid as the recovery. Such a proposal, combined with talking up the real accomplishments of the administration, could make for a helluva lot better message than: things would be worse if Republicans were in charge. Not just a better message, of course, but something tangibly better than what we've so far seen.

Originally posted to Meteor Blades on Sat Jul 17, 2010 at 08:35 AM PDT.

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