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Economic Forecasts

Bye Bye Recession

Our exclusive index says the economy is finally on the mend.

Layoffs tapered off in October, confirming that the recession is over and that economic growth;mdash;though spotty;mdash;has resumed, according to Kiplinger's Recovery Index. First-time claims for jobless benefits fell to their lowest level since January.

We introduced our Recovery Index in June. We said then that when three of our six benchmarks turned around, the recession would be over and the recovery under way. The first indicator to turn positive was the spread between the yield on risk-free three-month Treasury bills and the LIBOR, a rate at which banks lend to one another. The narrowing gap signaled that the credit freeze was thawing. Next came an upturn in existing-home sales as first-time buyers, nudged by an $8,000 tax credit, returned to the housing market.

It'll be months before the National Bureau of Economic Research, the arbiter of when recessions begin and end, determines the end of this latest downturn, which began in December 2007. We think the turnaround came last summer, putting the recession on par with the downturns of 1973-75 and 1981-82.

We'll pay close attention to the recovery as it takes shape. For now, we see gross domestic product growing at a rate of 3% to 3.5% in the third quarter and a bit more slowly in the fourth quarter. The main drag: jobs. Layoffs are slowing, but we don't see a pickup in hiring until early next year.