The U.S. economy is no longer in an “unremitting free fall” and its outlook has significantly improved in recent weeks, President Obama’s top economic adviser said Sunday.
Lawrence H. Summers, director of the National Economic Council, told “Fox News Sunday” that only a few weeks ago there were “no positive statistics to be found anywhere” with the nation’s economy and that it was “falling vertically.”
“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 in recent months repeatedly tried to temper expectations that the economy would make a quick recovery. Less than a week after the Obama administration took office in January, the economist warned that the nation’s economic problems were “not going to get solved that fast.”
“So even as we move to be as rapid as we can in jolting the economy and giving it the push forward it needs, we also have to be mindful of having the right kind of plan that will carry us forward over time,” he said in January.
Mr. Summers echoed this cautious tone again Sunday, saying 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 also 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 the depleted inventories in the automotive and new-house markets mean that demand for these products is expected to increase as the year wears on, spurring an economic uptick.
“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 also credited the $787 billion economic stimulus package and $700 billion Wall Street bailout that Congress passed in recent months as 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.
Regarding the troubled Chrysler LLC, which faces possible bankruptcy, Mr. Summers said he is encouraged by merger talks with Italian automaker Fiat Group SpA. “It’s in everybody’s interest, we believe, to see these negotiations succeed,” he said.
Chrysler is surviving on government loans and has until Thursday to work out a venture with Fiat.
He added that the administration will “certainly do our part to support a successful negotiation.”