Looking forward, one silver lining is the big inventory decline. Inventory “corrections” like this one usually set the stage for economic recoveries as production finally lifts to rebuild depleted supplies.

We expect we will see modest growth in the economy in the second half of the year. However, we do not expect to see rising employment this year as businesses, small and large, remain cautious.

The July report on employment showed continued, but moderating job losses, with payroll employment down 247,000 compared to the big 600-700 thousand declines in prior months and the unemployment rate actually fell slightly. Another July report from the Institute of Supply Management points toward recovery in U.S manufacturing with new orders, production, vendor deliveries and U.S. exports finally rising, while their employment measure continued to fall.

This is typical of a beginning recovery—turnarounds in business activity, while cost control stays in place for some time…