Six months into 2011, the economy is still bumping along the road to recovery, and the journey has been rough for a lot of Americans. Just last week, the Labor Department released its widely watched Payrolls Report, which showed an increase of 54,000 jobs — well short of the median forecast in a Bloomberg News survey that called for an increase of 165,000. The unemployment rate also rose to 9.1 percent.

In a separate report, data from the Institute for Supply Management showed that manufacturing expanded at its slowest rate last month in more than a year.

The ever-prescient stock markets sensed these trends a few weeks ago and have been selling off in anticipation of slower growth. The Dow Jones Industrial Average has fallen for five straight weeks, representing its longest streak of losses since 2004. Many consumer products companies have been lowering their earnings guidance in reaction to the tepid consumer demand.

The biggest challenge to the consumer’s wallet has been noncore inflation — specifically measured by food and energy prices. The cost to feed a family, heat the house and put gas in the car has been rising persistently. You have probably seen this in the price of coffee at the supermarket and the price of gas at the pump. This noncore inflation has only been partially offset by modest core inflation — the price of everything else.

Real estate has always been cyclical, and the weakness of recent years is likely to persist for several more years. The credit bubble that led to the Great Recession was directly related to excess lending in the housing markets. The bubble burst in 2008, shortly after home prices peaked in 2006-2007, depending on your location. Although the federal government was able to step in and bail out the U.S. financial system, including many of the banks, it was messy process and the cleanup continues today.

The problem is simple yet complex. There is an enormous inventory of foreclosed homes, and an equal number of homes that would benefit from a short sale (the accepted sale price is less than the mortgage amount). In both situations, the bank and/or investors who own that mortgage must realize the loss on the investment. Understandably, many are reluctant to do so, and the inventory builds up.

In addition, buyers are scarce. In spite of lower housing prices, the cost to rent a home in many U.S. cities is more attractive than buying. Ironically, those families who are ready to buy are often turned down for loan approval by the very banks that are in business to lend. A good job and a good credit score may not be enough to get a loan. You will also need a significant down payment, as well. My comment would be that home loan underwriting is too restrictive today.

The end result is that many areas of the country are close to experiencing a double dip in their housing markets. Since 2010, when prices were stabilizing in most areas, the larger inventory of distressed properties combined with weaker demand have caused a softening of prices in 2011. In some parts of the country where job formation is stronger, the opposite is true.

But no matter where you live, the recovery will likely be modest for some time to come. The economic events of 2008 were like no other, and this recovery will be like no other, as well.

— Bill Masho is the broker/owner of Masho Associates. He can be reached at 805.895.4362.