- The Washington Times - Thursday, July 30, 2009

The U.S. economy showed modest signs of stabilizing or bottoming out, according to economic data released by the Federal Reserve’s 12 regional banks Wednesday, as President Obama said the country may be seeing the “beginning of the end of the recession.”

“We have stopped the free fall,” Mr. Obama said, during a town hall meeting in North Carolina, though he cautioned that “we know the tough times aren’t over.”

The report from the Fed’s 12 regions, which is routinely prepared in advance of Fed policy meetings and is called the Beige Book, said that economic activity had “begun to stabilize, albeit at a low level” in most of these areas.

But the report also shows that “the economy will not come roaring back, as plenty of stress lines remain,” said Ryan Sweet, an economic analyst at Moody’s Economy.com.

Labor markets in all 12 districts “remain slack,” the Fed said, as employment continues to decline beyond the current 9.5 percent jobless rate. Most districts indicated their labor markets were “extremely soft.” The weakness of labor markets has “virtually eliminated upward wage pressure,” and wages and compensation were “steady or falling” in most districts.

In a separate report, orders for durable goods suffered a surprisingly steep decline in June; but after removing the volatile auto and aircraft sectors, bookings increased a strong 1.1 percent last month, the Commerce Department said Wednesday.

Economists regard orders for durable goods - autos, refrigerators, computers and other products expected to last at least three years - to be a key indicator of future activity in the manufacturing industry. Since the longest postwar recession began in December 2007, monthly manufacturing output had plunged 18 percent by June, according to the Federal Reserve’s July 15 report on industrial production.

Many districts said manufacturing activity “remained depressed but with selected signs of modest improvement.” The report said the Fed expects a “modest and uneven recovery in manufacturing” during the next six to 12 months.

All 12 Fed districts described commercial real estate leasing markets as “weak” or “slow.” Residential real estate markets “remained weak, but many reported signs of improvement.”

Two other developments in housing have analysts cautiously optimistic that the worst of a brutal housing slump - which lies at the heart of the current crisis - may be over. Sales of existing homes rose in June for the third consecutive month, and a price index of national averages released Tuesday showed increases in eight major cities and a flat price index among 20 composite cities.

Mr. Obama made his comments during an impassioned defense of his administration’s response so far to the economic crisis, in a town hall event in Raleigh, N.C., the first of two such meetings he headlined Wednesday.

Mr. Obama, clearly invigorated by the cheering and supportive crowd in Raleigh, took on critics who say his administration is engaging in out-of-control spending and an expansion of government.

“There should be little debate that the steps we took, taken together, helped stop the economic free fall. That’s the story of the first six months,” Mr. Obama said.

However, a National Public Radio poll released Wednesday showed that 48 percent of 850 likely voters surveyed think that the president’s policies have run up the deficit without slowing the recession or job losses, with 45 percent saying they thought Mr. Obama had averted a worse crisis and laid a foundation for recovery.

Mr. Obama also defended the $787 billion economic stimulus bill passed in February to jump-start the economy.

“This money is not being wasted,” he said, countering the perception created by comments such as those made by Vice President Joseph R. Biden Jr., who said last month that “we know some of this money is going to be wasted.”

And he ridiculed conservative critics who worked in Congress or in the George W. Bush administration, which he said handed him a $1.3 trillion deficit that has now grown under Mr. Obama to a projected $2 trillion by the end of the year.

“I mean, seriously. I’m now president, so I’m now responsible for some of it. But I don’t think we should have selective memory,” Mr. Obama said to loud affirmations and cheering in Raleigh. “You hand me a $1.3 trillion bill, and then you’re complaining six months later because we haven’t paid it all back?”

Mr. Obama also stated that if health care costs $1 trillion, that is “a lot less than we spent on the war in Iraq.”

But the government so far has spent $669 billion on the Iraq war, according to the National Priorities Project. The Congressional Budget Office has estimated that the Iraq war ultimately may cost $2 trillion.

On health care, Mr. Obama defended the still-evolving reform plans being worked on in the House and Senate.

“Nobody is talking about some government takeover of health care. I’m tired of hearing that. I have been as clear as I can be,” the president said. “Under the reform I’ve proposed, if you like your doctor, you keep your doctor. If you like your health care plan, you keep your health care plan.”

The president mentioned that he saw people holding signs protesting his appearance at both events. Some of the signs read “Obamacare is socialism,” “Stop lying - we do have a plan” and “Socialism isn’t cool.”

Mr. Obama chuckled when he mentioned the protesters and said they had been “riled up” by “listening to certain radio programs or watching certain TV programs.”

The president said that opponents of his plan were spreading “misinformation” and said they “need to stop scaring everybody.”

But independent estimates from the CBO and the Lewin Group have found that millions of Americans - anywhere from 23 million under one version in the Senate to 114 million under the plan in the House - would be forced out of their current insurance plans if some of the reform ideas are adopted.

Mr. Obama gave essentially the same remarks at his second town hall event, in Bristol, Va., a more conservative area. The reception there for the president was more restrained.

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