Report Forthcoming; Recession Slowing?

WASHINGTON (AP) - The recession's grip on the country may be
letting up a bit.

The government is set to release a report Wednesday expected to
show the economy shrank at a pace of 5 percent in the first three
months of this year. If Wall Street analysts' forecasts' are
correct, the figure - while still extremely weak - would be viewed
as a hopeful sign that the worst of the recession - in terms of
lost economic activity - may be past.

"The recession is easing up," said John Silvia, chief
economist at Wachovia. "We're probably bottoming out here in the
first half of this year."

The economy in the final three months of last year logged its
worst downhill slide in a quarter-century, contracting at a 6.3
percent annual rate as nervous American consumers ratcheted back
spending in the face of rising unemployment, falling home values
and shrinking nest eggs.

The less steep decline in economic activity anticipated by
analysts in the January-March quarter is based on the expectation
that shoppers at home and abroad didn't pull back quite as much at
the start of this year.

Consumer spending, which accounts for roughly 70 percent of
national economic activity, is still expected to be negative. But
it will probably log a small dip versus the big 4.3 percent
annualized decline seen in the final three months of 2008. The same
rationale would hold for sales of U.S. exports, which have been
crimped as economic troubles in other countries force foreign
buyers to be cautious.

Many analysts predict the economy will shrink even less in the
current April-June period - at a pace of 1 to 2.5 percent. Tax cuts
and increased government spending on big public works projects
included in President Barack Obama's $787 billion should help
bolster economic activity. Analysts hope the economy will actually
start to grow again in the final quarter of this year.

However, the recent outbreak of the swine flu, which started out
in Mexico and has spread to the United States and elsewhere, poses
a new potential danger. If the flu stifles trade and forces
consumers to cut back further, those negative forces would worsen
the recession.

Moving to contain the threat, the White House asked Congress for
$1.5 billion to fight a swine flu outbreak. President Barack Obama
sent a letter to lawmakers on Tuesday, asking them for a
supplemental spending plan to build drug stockpiles and monitor
future cases.

Before the flu outbreak, Federal Reserve Chairman Ben Bernanke
said the recession could end this year if the government succeeds
in stabilizing the shaky financial system and getting banks to lend
again.

To combat the worst financial crisis since the 1930s, the Fed
has slashed a key bank lending rate to a record low near zero and
rolled out a string of radical programs to spur lending. The Fed at
the end of its two-day meeting Wednesday is expected to keep its
key rate near zero.

Besides the $787 billion stimulus, the administration is
counting on its efforts to rescue banks and curb home foreclosures
to turn the economy around.

Bernanke and his colleagues have cited "tentative signs" of
the recession easing in some consumer spending, home building and
other reports. Finance officials from the U.S. and other top
economic powers meeting here last week also saw some hopeful signs
for the global economy.

Fresh glimmers of hope emerged in the U.S. Tuesday. The
Conference Board's Consumer Confidence Index rose far more than
expected in April, jumping more than 12 points to 39.2, the highest
level since November. And a housing index showed that home prices
dropped sharply in February, but for the first time in 25 months
the decline was not a record.

Even if the recession were to end this year, the economy will
remain feeble and unemployment will keep climbing.

The jobless rate is now at a quarter-century high of 8.5 percent
and is expected to hit 10 percent by the end of this year. It will
probably rise a bit higher in early 2010 before starting to slowly
drift downward. Still, the Fed predicts unemployment will stay
elevated into 2011, and economists don't think it will return to
normal - around a 5 percent jobless rate - until 2013.

More layoffs were announced this week. General Motors Corp. laid
out a massive restructuring plan that includes cutting 21,000 U.S.
factory jobs by next year. Bearings and specialty steels maker
Timken Co. indicated it will cut about 4,000 more jobs by the end
of this year after earlier suggesting about 3,000 jobs already had
been targeted.

Elsewhere, construction equipment maker Bobcat Co. told nearly
250 workers at its two North Dakota plants they will be laid off
indefinitely, executive search firm Heidrick & Struggles
International Inc. announced plans to cut more jobs and reduce
bonuses and salaries, and Lockheed Martin Corp. said it's cutting
225 jobs at a plant in upstate New York.


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