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US economy appears poised to start growing again

(Agencies)
Updated: 2009-08-01 15:36

Even if the recession ends later this year, the job market will remain weak. Companies are expected to keep cutting payroll through the rest of this year.

The Fed says unemployment - now at a 26-year high of 9.5 percent - will top 10 percent at the end of this year. Businesses won't likely boost hiring until they're certain the recovery has staying power.

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In the second quarter, businesses - including home builders - continued to cut spending, though not nearly as much as they had earlier. That's one reason the economy didn't contract as much as feared.

Consumers retreated en masse. They sliced spending at a rate of 1.2 percent in the second quarter, after having nudged up purchases at a 0.6 percent pace in the first quarter. In large part, that's because wages and salaries have fallen for the past three quarters.

With people spending less, Americans' savings rate rose sharply - to 5.2 percent in the second quarter, the highest since 1998.

As important as savings is, many economists wish that consumers would save less and spend more right now to help propel the recovery.

"I'm praying, 'God, please don't encourage American households to save a lot more just yet,'" said Nariman Behravesh, chief economist at IHS Global Insight.

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