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US recession is easing but hard times are still ahead, say officials


Text by FRANCE 24

Latest update : 2009-08-04

According to administration officials, US economic growth is highly likely to resume in the second half of the year. But they also warn that the jobless rate will continue to climb from its current level of 9.5 percent during the upcoming year.

Top officials on Sunday expressed cautious optimism about the future of the US economy, saying that recovery would likely begin soon even as "hard choices" lay ahead.

Treasury Secretary Timothy Geithner, White House economic adviser Larry Summers and former Federal Reserve chairman Alan Greenspan voiced their encouraging assessments during widely watched television interviews.

The rush to deliver the positive news suggested that the Obama administration’s awareness that the president’s political popularity and leeway – as well as his ability to finance reform – depends in part on how quickly the US economy bounces back.

The good news

Geithner and Summers, appearing on US talk shows, put forth arguments that President Barack Obama's economic stimulus program was gaining traction despite rising unemployment and concerns about the US deficit.

Their upbeat tone during a period of extreme economic anxiety coincided with a new estimate of the gross domestic product showing that the US economy contracted 1.0 percent in the second quarter – a better showing than forecasters had expected.

"A very great likelihood, and this is what most professional forecasters say, is that we'll see growth going forward in the second half of this year," Summers said in an interview with NBC.

Geithner, echoing the perspective in a separate TV appearance, said that “there are signs the recession is easing. And if you think about where we were at the end of last year – we had an economy in freefall, a financial system on the verge of collapse."

Meanwhile, Alan Greenspan stated that he was "pretty sure" the US economy had hit bottom and began to turn around in mid-July.

Unemployment and deficits remain daunting

Summers and Geithner were nevertheless careful to frame the good news within the bleaker context of the worst US financial crisis in half a century.

Both acknowledged that the jobless rate would continue to rise from its current level of 9.5 percent. Geithner cited private analysts’ predictions that unemployment would not start coming down until the beginning of the second half of 2010.

"I want to emphasize the basic realities," he said. "Unemployment is still very high in this country."

Another major challenge facing the Obama administration as it attempts to guide the US economy out of recession is controlling the soaring deficits that have been incurred in refloating the economy.

Republicans have picked up the issue as their main line of attack on Obama's economic program and his push for health-care reform.

Geithner said the first priority was stabilizing the economy but acknowledged that the recovery will not be "strong and sustained unless we can convince the American people that we're going to have the will to bring these deficits down once recovery is firmly established."

Asked whether that entailed raising taxes, Geithner said, "We're going to have to do what is necessary. And that's going to require some very hard choices."

Date created : 2009-08-03