- The Washington Times - Sunday, April 26, 2009

The U.S. economy no longer is in an “unremitting free fall,” and its outlook has improved significantly in recent weeks, President Obama’s top economic adviser said Sunday.

Lawrence H. Summers, speaking on “Fox New Sunday,” said that while two months ago there were “no positive statistics to be found anywhere” with the nation’s economy, “today the picture is much more mixed.”

“No one knows what the next turn will be. But I think that sense of unremitting free fall that we had a month or two ago is not present today,” he said. “That’s something we can take some encouragement from.”

Mr. Summers said that it’s too early to tell whether the domestic economy has made a permanent turn for the better and that some negative economic indicators remain.

He added that employment numbers likely will continue to drop for the rest of the year because “history shows it takes some time, six months or more, for a stimulus to work its way through and job creation to begin.”

But he said that “if you look at the consensus of professional forecasters, that consensus suggests a somewhat better performance towards the end of the year.”

Mr. Summers said depleted inventories in the automotive and new-house markets mean that demand for these products is expected to increase as the year wears on, which in turn will prime the economy.

“When inventories are being drawn down, they eventually have to be built back up, and that will be a source of momentum in the economy, probably in the second half of the year,” he said. “These imbalances can’t continue forever, and when they are repaired, they will be a source of impetus to the economy. Just what the timing will be no one can know.”

Mr. Summers credited the $787 billion economic stimulus package and $700 billion Wall Street bailout that Congress passed in recent months as being key components for helping calm the turbulent economy.

“If we had done nothing, if we had not stepped up and provided substantial demand with the Recovery and Reinvestment Act, if we had not been prepared to support families on their mortgages, if we had not taken steps to rebuild trust and confidence in the banking system, then we’d be in a far, far worse situation right now,” he said.

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