Data suggest U.S. recession is over

The nation's bouncing economic data shot up yesterday, leading politicians, economists and Wall Street to declare the recession over, though roughly one in 10 working Americans still is out of a job.

The latest indicator: The U.S. economy grew at an annual rate of 3.5 percent in July, August and September, according to the government's first estimate of gross domestic product, the sum total of goods and services produced in the country.

More than half the gain came from the auto industry, buoyed by the one-time Cash for Clunkers program, said J. Steven Landefeld, director of the U.S. Bureau of Economic Analysis.

While consumer spending was up, with roughly half the gain from purchases of cars and parts, the bureau's calculation of U.S. economic activity showed business investment continued to slide.

Businesses also continued to run down their inventories, rather than upping production or ordering new raw material to meet consumer demand, though the rate of decline slowed, the bureau report showed.

"So what you're seeing is Cash for Clunkers and help to buy homes, and that makes the economy grow 3.5 percent?" posed Anthony M. Carilli, director of the Center for the Study of Political Economy at Hampden-Sydney College.

"The question is: Is it sustainable?"

The autoand home-sales growth, from extremely depressed levels, made many ask the same question.

"People did buy cars and they bought houses, and there is a ripple effect," said Christine Chmura, president and chief economist of the Richmond-based forecasting firm Chmura Economics and Analytics.

"Automakers needed steel, and so steelmakers called workers back months earlier than planned. And when people buy homes, they need appliances and carpets and furniture," she said.

"All of this I expect will grow and build into a real recovery."

But Chmura said growth won't continue at the third-quarter pace. She's looking for the current quarter to grow at a more modest 1 percent annual rate.

She doesn't expect employment to pick up until the end of 2010.

"That's when people will really start feeling the economy is stronger," she said. "We relate more to people being laid off than to the pace of GDP."

Bart van Ark, chief economist of The Conference Board, a business group, said the third-quarter estimate news was driven largely by temporary factors.

"We have clearly begun to emerge from the trough. But there's still a long way to go, and we still don't know enough about the sustainability of these recovery signals," he said.

At the White House, Christina Romer, chairwoman of the Council of Economic Advisers, said the government's stimulus program accounted for most or all of the growth reported in the third-quarter estimate.

"After four consecutive quarters of decline, positive GDP growth is an encouraging sign that the U.S. economy is moving in the right direction," she said. "However, this welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered."

Analysts had expected third-quarter GDP to rise 3.2 percent, and the better-than-expected estimate boosted Wall Street.

The estimate is subject to later correction -- the first-quarter figure bounced from an initial decline of 6.1 percent to a revised decline of 5.7 percent to a re-revised decline of 6.4 percent.

The figure is based on surveys the Commerce Department conducts of business activity. The initial estimate is based on two months of survey data and extrapolations for just over half the measures of economic data tracked, Bureau of Economic Analysis documents show.

Contact David Ress at (804) 649-6051 or dress @timesdispatch.com.