- The Washington Times - Saturday, June 6, 2009

It’s not over yet.

That was the message from both a key report on job losses Friday and the head of the Boston committee that officially declares when a recession has ended. Both showed that the economy has a long way to go before growth returns.

Employers continued to slash jobs, and the unemployment rate kept soaring. The jump in unemployment from 8.9 percent to 9.4 percent in May left joblessness at the highest levels in more than a quarter-century. But the monthly rate of job losses, at 345,000, was only half the peak rate of 700,000 hit earlier this year.

The slowing of the economy’s decline from extreme levels during the winter has led some economists and traders in financial markets to declare that the recession is nearly over. The belief that the economy is on the verge of turning around has spawned strong rallies in markets from stocks to oil and risky forms of credit.

But the head of the National Bureau of Economic Research committee that dates key turns in business cycles, Robert Hall, firmly put down speculation that the economy is definitively repaired.

It’s “way too early” to say the recession is over, he told Bloomberg News. Economic output “had a trough earlier this year, but it is way too early to say that it is a true trough rather than a pause in a longer decline.”

Mr. Hall added that it is likely to be “a long time” before the committee will be able to determine whether and when the recession ended, because of the conflicting signals being sent by the economy.

Friday’s jobs report from the Labor Department was a case in point.

The divergence between the surging unemployment rate and slowing job losses left economists at odds over the outlook for the economy.

“The massive hemorrhaging over the past few months has abated and the worst slump is behind us,” said Sung Won Sohn, business professor at California State University, one of many economists who believe economic growth will return in the second half of the year.

He explained that the continued rise in the unemployment rate is an after-effect from the deep recession.

“Once the economy stabilizes around mid-year, a jobless recovery could be in store,” he said. “The unemployment rate, a lagging indicator, will keep marching upward throughout the year. The unemployment rate will hit 10.5 percent by year-end before showing signs of moderation.”

A key ingredient of the recovery, Mr. Sohn said, is the more upbeat mood of consumers.

“Consumers have become more optimistic about the future. They believe it is a good time to buy houses and other big-ticket items,” he said, although he acknowledged that consumers remain “cautious about spending in general” and “focused on necessities like food, shunning luxuries.”

Other economists believe the outlook for the economy is darker and that markets have gone too far in anticipating a recovery.

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