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Economic Forecasts

The Recession Is Over

Declining jobless claims have pushed our measure of key economic indicators into positive territory. But brace for a wobbly upturn.

Is the recession over? Yes. With initial jobless insurance claims on the wane, our recovery index is flashing three green signals, indicating that the economy has touched bottom and is on its way back up. A trend toward fewer folks filing for unemployment benefits joins increased sales of existing homes and the return to more normal credit spreads as indications that the fever has broken and the patient is recuperating.

The four-week moving average of initial claims for unemployment insurance recently dropped below 550,000, dipping to 549,000 for the week ending Sept. 26. For the week ending Oct. 3, the average continued to slide, coming in at 540,000.

It’s the pace and strength of the recovery that matter now, particularly whether improvements in gross domestic product translate into increased employment. Until businesses start adding to their payrolls -- probably not until next year -- indicators tracking the consumer (retail sales) and manufacturers (durable goods orders) will likely remain unsteady. Housing sales (another consumer indicator) have been doing well this year, having gotten a boost from Uncle Sam in the form of the $8,000 federal income tax credit for new home buyers.

Kiplinger Recovery Index