Summers: Economy's Steep Plunge May Be Ending
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One of President Obama's top advisers is offering some cautious words of optimism about the U.S. economy. Larry Summers says the period of freefall will soon end, but he warns that even after the worst of the downturn is over, job losses are likely to continue. Summers spoke yesterday at the Economic Club of Washington. NPR's Scott Horsley reports.
SCOTT HORSLEY: Larry Summers says the U.S. economy is still facing plenty of downdrafts. You don't recover overnight after losing more than 600,000 jobs a month. But the chairman of the president's National Economic Council says he is seeing some encouraging signs here and there. Credit, while still tight, is getting a little easier to come by. And those warehouses full of unsold inventory are beginning to empty, which should eventually mean fresh demand to produce more goods.
Mr. LARRY SUMMERS (Director, National Economic Council): The sense of a ball falling off a table, which is what the economy has felt like since the middle of last fall, I think we can be reasonably confident that that's going to end within the next few months, and that you'll no longer have that sense of freefall.
HORSLEY: Summers says the strength of the U.S. recovery will depend on a variety of factors, including consumer sentiment, what happens in other countries, and the success of the president's own economic agenda. Economists surveyed by the Wall Street Journal say they expect the recession to bottom out and a modest recovery to begin this fall. But Chief Economist Stewart Hoffman, of PMC Financial Services, says it will take longer than that for the job market to catch up.
Mr. STEWART HOFFMAN (Chief Economist, PMC Financial Services Group): The labor market still maybe feels like it's in freefall. Jobs are still being lost at a very rapid rate - layoffs. The job market is not the canary in the coal mine, so to speak. That's not where you're going to see the first signs of the economy, that's more like - frankly, the caboose of the economy.
HORSLEY: The Labor Department said yesterday that continuing claims for unemployment hit another record high last week, with more than 5.8 million people drawing benefits. New jobless claims were down, though just a bit. Summers told the Economic Club the unemployment rate will surely climb higher than its current level of 8.5 percent, but he declined to offer a specific forecast.
Mr. SUMMERS: And I think there are seven cameras there, which means there are seven too many for me to provide the number at which it will be.
(Soundbite of laughter)
HORSLEY: A year ago, Summers was collecting tens of thousands of dollars for speaking engagements, including talks at some of the big banks that later got government rescues. His appearance yesterday was briefly interrupted by two protestors, who unfurled a banner reading: We want our money back.
(Soundbite of protests)
Unidentified Man (Protestor): We want our money back.
(Soundbite of protests)
HORSLEY: Although he made millions last year, from banks and a hedge fund where he worked part time, Summers voiced cautioned about the outsized role that the financial industry has come to play in the U.S. economy. He said that financialization is at least partly to blame for a growing concentration of wealth in the country, and he added the Obama administration hopes to build the next economic boom on a more sustainable footing.
Scott Horsley, NPR News, Washington.
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