U.S. recession seen not yet bottoming

The U.S. recession may be easing, but the economy has not hit bottom yet and mounting unemployment looks likely to keep demand sluggish for a while.
A slew of recent data — including stronger-than-expected reports on orders for big-ticket manufactured goods, housing and retail sales — has led many economists to declare that the worst of the 15-month, housing-led recession is over.
While the economy still appears on a downward path, the slope is not as steep as many had feared.
"We have seen in the last few weeks enough meaningful indicators that show the economic contraction has slowed," said Bernard Baumohl, chief global economist the Economic Outlook Group in Princeton, New Jersey.
"The odds have increased markedly that we are approaching an inflection point in the economic cycle and that the worst of the recession is behind us," he said. "We're now probably months away from bottoming out."
The economy plummeted at a 6.3 percent annual pace in the fourth quarter, and many economists were expecting a similarly sized drop in the first three months of this year. But the relatively upbeat data has led them to trim those forecasts.
SOME "GREEN SHOOTS"
Sales of both previously-owned and new home sales rebounded in February. Still, the recovery was from historically low levels, making it hard for some analysts to look at the figures as a harbinger of a turn in the economy.
"We can see some green shoots out there in the economy, but that's not enough at this point to tell me definitively that we are close to bottoming out in this process," said Robert Dye senior economist at PNC Financial Services in Pittsburgh.
"There remain significant down drafts in the economy. The linkage between falling home prices, weak consumer confidence, squeezed corporate profits and deteriorating labor markets remains very much in place."
Housing is at the center of the worst economic and financial meltdown in decades, and stabilizing the sector is critical to reversing the economy's fortunes.
The collapse in asset prices, combined with falling incomes on the back of escalating job losses, have curtailed consumers' ability to spend. Household net worth plunged by $11.2 trillion in 2008, according to Federal Reserve data.
CONSUMERS SHOWING SOME LIFE
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, tanked in both the third and fourth quarters of last year. But there are indications it may finally be inching up. Retail sales surged in January and fell only slightly in February.
"We are not there yet, but there are increasing signs there could be a turn in the business cycle in the summer or fall of this year. We need more than a month or two before we can get confident about it," said Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut.