Economic Free Fall Slows During Second Quarter of 2009

Finally, there’s encouraging news on the economic front.  The economy declined just one percent during the second quarter of 2009, a rosier report than was expected.  It is the strongest signal so far that the longest recession since the end of World War II is easing its grip.

In a report issued by the Department of Commerce covering the quarter from April through June, the one percent drop in the GDP stands in stark contrast to the 6.4 percent free fall that characterized the first quarter of 2009.  That was the biggest decline in almost 30 years.  The economy shrank for four straight quarters for the first time since 1947, evidence of how severely the recession has hurt consumers and companies.

“The recession looks to  have largely bottomed in the spring,” said Joel Naroff, president of Naroff Economic Advisors.  “Businesses have made most of the adjustments they needed to make, and that will set up the economy to resume growing in the summer.”

Fed Chairman Ben Bernanke believes the recession will end towards the end of the year.  The Obama administration’s stimulus program that combines tax cuts with government spending enhanced second quarter economic activity.  Economists believe the stimulus will have a greater impact through the second half of the year, and even in 2010.

The job market is expected to remain weak.  The current 9.5 percent unemployment rate marks a 26-year high, and the Fed expects it to top 10 percent by year’s end.  Companies will remain cautious about hiring until they are convinced that the recession is officially in the past.