Recovery hopes begin to blossom

A growing number of economists say they see signs that the battered U.S. economy could start to recover as soon as this summer.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Chris Isidore, CNNMoney.com senior writer

How much do you have in your emergency fund?
  • More than 6 months of living expenses
  • 3-6 months of living expenses
  • Less than 3 months of living expenses
  • None

NEW YORK (CNNMoney.com) -- Unemployment at a 25-year high. Housing prices continuing to fall. Corporate titans such as General Motors on the brink of bankruptcy. There's no lack of bad economic news.

And yet, amid the gloom, there are a growing number of economists that see a recovery on the horizon -- perhaps even a strong rebound.

They say that a number of indicators appear to have bottomed out in recent months. Job losses may have peaked in January. Home sales are starting to pick up. Stocks are enjoying a strong rally.

And because the economy has experienced such a steep decline in the current downturn, some economists are hopeful the recovery ahead will be much stronger than the anemic gains that came about after the end of the previous two recessions.

Lakshman Achuthan, managing director of Economic Cycle Research Institute, said the economy could be as close to four months away from a recovery.

He says his firms' readings on long-term and short-term economic indicators give him significantly more hope that the economy is closer to a turnaround than he had thought even a month ago. Among the more than dozen different things his firm looks at are home prices, the jobs picture and stock prices.

"These readings don't really turn unless something is happening," he said.

To be sure, many economists still think that the recession won't end until much later this year, if not 2010. But Mark Zandi, chief economist of Moody's Economy.com, also believes that a recovery could be closer than most people think. However, he said an end to the recession will largely depend on improvement in the labor markets.

"We're starting to see some pent up demand for goods. But first things first, we need to see job losses moderate," he said.

Zandi said just a slowing rate of job losses should help make people more confident about their own job outlook, as will a continuation of the recent gains for stocks.

Those two factors, plus a sign that home price declines have ended will help to turn around consumer confidence, Zandi said. That should help spur more spending.

Zandi said the problem with confidence today is that when things aren't going well, many people can't picture things getting better, just as they have trouble imagining declining prices of homes and stocks during a boom period.

"Confidence is a very fickle thing. It can go from abject pessimism that pervades now to a more balanced view of the world rather quickly," he said.

Robert Brusca of FAO Economics, also believes there will be a fairly sharp recovery, mainly because this recession was so much worse than the ones in 1991 and 2001.

A slow, jobless recovery took place after those recessions, which were both fairly mild by historical standards. But the economy has often bounced back sharply following more severe recessions.

Brusca points out that, prior to the 1991 and 2001 downturns, the nation's gross domestic product has gained about 7%, on average, during the first year of a recovery.

For this reason, he is predicting strong growth in at least one of the year's final two quarters as well as a quicker return to health for the labor market.

"You've lost 5 million jobs. It shouldn't be hard to put 2.5 million jobs back on rather quickly after you hit bottom," he said.

Joseph Carson, chief economist at AllianceBernstein, said the economy is already showing early indications of turning around. In addition to improving home sales and positive signs from the stock and bond markets, retail sales in February and March were stronger than expected.

And all of this has happened before the nearly $800 billion stimulus package that was enacted earlier this has had much of an effect. Because of this, Carson said the stimulus plan could create stronger than expected growth -- and much sooner than consensus forecasts.

"Stimulus has a much better chance of working if trends are already turning up than if it needs to halt a decline," he said. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Sponsors
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.