When should an editor use reviewers recommended by authors of a submitted manuscript?
The way the preferred reviewers are used varies. Some go by these suggestions whole-heartedly while others do not. I lean towards the latter since my experience with some preferred names is less than favourable.

In my experience names listed can be good. I usually double check to see if persons seem affiliated in some way and if they do I avoid appointing them. As a rule, however, I try to find persons independently and based on my own experience. I tend to use the preferred names as back-ups unless my preference and the authors coincide.

The reason for my slight aversion towards the preferred is that some authors tend to list friends and other persons who are obviously close to the authors. I have seen many low quality reviews come out from such reviewers an clearly at a rate very different from independently chosen reviewers. Judging what is too close is not easy and sometimes it may be justified if, for example, the topic is such that local knowledge comes into play. For the reason of uncertainty I therefore try to at least mix them up so that one is chosen by me independently and the other is selected from the authors suggestions.

So, try to assess the quality of the preferred reviewers and at least try to find some to complement a preferred reviewer will be my advice.

It is also common that authors list non-preferred reviewers. I always stay clear of such reviewers since I do not know what lies beneath the sentiment.