WASHINGTON -- A spike in unemployment claims Thursday underscored the bumpiness of the economic recovery -- consumers are spending more, factories are making more, but layoffs have not tapered off as fast as expected.
So can the recovery gather much steam if 17 percent of working-age Americans remain jobless or underemployed?
Employers have begun to add jobs recently, including 162,000 in March. Yet much stronger job creation is needed to ease the current 9.7 percent unemployment rate.
And if layoffs were to spike and job creation sputter, the rebound could fall back into a "double-dip" recession.
The odds of that have receded as the economy has strengthened, but it can't be dismissed.
"It looks like we're on a path to moderate recovery and that the risk of a double-dip, while certainly not negligible, it is certainly less than it was a few months ago," Federal Reserve Chairman Ben Bernanke told Congress Wednesday.
"That being said, there are any number of possible things that could derail it."
At the top of Bernanke's risk list is chronically high unemployment, which he said could cause consumers to spend less and weaken the recovery.
Economists think unemployment probably will remain above 9 percent by the November midterm elections, making Democratic and Republican incumbents in Congress vulnerable, particularly in hard-hit states.
President Barack Obama is summoning top economic advisers for a meeting today to talk about creating new jobs, the White House said.
In its report on unemployment claims, the government said the number of newly laid-off people signing up for jobless aid last week surged 24,000 to a seasonally adjusted 484,000. That was the most since late February. Economists had predicted a drop in first-time claims.
It marked the second week that claims unexpectedly leaped. The government cautioned against reading too much into the past two weeks' figures, saying they were skewed by seasonal adjustments related to Easter.
But some economists were disheartened by the report.
Mike Feroli, an economist at JP Morgan Chase Bank, called the back-to-back increases "a clear disappointment" and "a puzzle against the backdrop of generally improving economic data."
One theory is that hiring is being held back by productivity gains. Companies are boosting production and meeting customer demand by squeezing more work from their existing staff. That means they can get by with fewer workers.
For all of 2009, workers' productivity grew 3.8 percent, the fastest pace in seven years.
If that pace of productivity growth were to persist, Bernanke said Wednesday, "there is a possibility, I wouldn't consider it the leading possibility, but there is a possibility that unemployment will stay stubbornly high, around 10 percent."
During the recession, companies slashed their payrolls, with more than 8.2 million jobs cut. Employers are loath to ramp up hiring until they see a big and sustained increase in sales, yet few expect robust sales gains anytime soon.
Among the companies still cutting staff is American Electric Power, one of the nation's largest power generators. This week, it told employees it plans to trim its work force by up to 10 percent. It said it hopes that between 1,000 and 2,000 of its nearly 22,000 employees will accept buyout offers.
Jobs cuts like those help explain why the unemployment rate has been stuck at 9.7 percent for three months, near its highest levels since the 1980s. Competition for job openings is fierce. Counting people who have given up looking for work and part-timers who would prefer to be working full-time, the so-called underemployment rate is 16.9 percent.
Bernanke noted that chronically high unemployment and weak job creation could further weaken consumer confidence. Shoppers would hold back on spending. A sharp retrenchment by consumers could throw the nation into a recession again.
So far, consumers have been holding up fairly well to the strains of high unemployment, stagnant wages and tighter credit. Sales at the nation's retailers grew a strong 1.6 percent in March, the government said Wednesday.
Joel Naroff, president of Naroff Economic Advisors, said he had expected claims would be much lower by now, around 400,000 to 425,000, and pointing toward a lower jobless rate.
"The labor market isn't necessarily deteriorating further, but it is not improving at the pace we hoped it would," he said.