Remember the "new normal"?
It's back on investors' minds.
The idea behind "the new normal" was that you can't count on a recovery after a financial crisis to be similar to what has been the typical post-recession period.
Instead of a surge in growth, the sickness that begins in the financial system lingers in the economy for a long time, creating a sluggish period that lasts long enough to begin feeling normal. The scenario includes high government debt, slow economic growth of about 2 percent to 2.5 percent and sticky unemployment that will ease slowly.
Amid a strong stock market rally and improving economic data late last year, investors forgot the term coined toward the end of the financial crisis. Now, investors are stewing over conditions far weaker than they would have expected during last year's peppy fourth quarter.
Home prices are still falling, despite losing 33 percent from the 2006 peak; manufacturing is slowing; and May's unemployment rate of 9.1 percent is worse than March's 8.8 percent.
"Pretty near everyone is confused," said Vincent Farrell, chief investment officer of Soleil Securities Corp. He notes that there is too little to show for all the stimulus the government's provided to resuscitate the economy.
Meanwhile, the rising unemployment rate remains troubling. "Hiring is the main missing piece in this recovery," said Credit-Suisse economist Henry Mo. Although layoffs have declined to pre-crisis levels, the number of unemployed people able to find a new job "is now even lower than at the end of the Great Recession."
