Summers On the Recovery

The WSJ’s Henry Pulizzi writes on the Larry Summers economic outlook this morning. Speaking to the National Association of Business Economics, the White House economic advisor pointed to a stabilizing housing market and normalized credit spreads as good signs:

This is for all its problems a better picture than most expected six or nine months ago. We are no longer discussing panics, we are no longer using metaphors about balls falling off tables.

The NABE President-elect Lynn Reaser also was positive:

The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about inflation.

These comments are consistent with what a friend of mine at Treasury told me this weekend, commenting that the prevailing view is that the crisis is over and resources are shifting towards a more medium-term view.

Nevertheless, Summers did offer some words of caution:

[L]ack of demand will be the major constraint on output and employment in the American economy for the foreseeable future. The combination of low capacity utilization and substantial leveraging of household balance sheets raises questions about the sustainability of demand growth going forward.

He also suggested that the it could have been worse attitude is really “an unsatisfactory state of affairs.” The question is at this point, will the recovery we see last or is it the uptick in a “W” shaped recession? If the latter then when should we expect the down-slope? Next month? 2011? For my part I think the weight of all the government intervention is going to be what induces the next recession in a “W” or “VVV” shaped recovery.

Read Pulizzi’s whole piece here.