Signs point to economic recovery

Several signs point to an end to the country’s recession, including the Federal Reserve’s leaving interest rates alone, gross domestic figures and the slowdown of the job-loss rate.
On Wednesday, the Federal Reserve ended a year-long campaign of interest-rate cuts, leaving borrowing costs steady, but warning there is a small risk of weakness, in a signal it could act again if a recovery fails to materialize.
Amid growing signs the recessionary gloom that set in last March was lifting, policy-makers at the Fed left the fed-funds rate, which determines borrowing costs throughout the economy, unchanged at a 40-year low of 1.75 percent.
The more symbolic discount was also unmoved at 1.25 percent.
The policy-makers said the outlook for economic recovery had become more promising.
Earlier Wednesday, the Commerce Department said the gross domestic product, the broadest gage of the economy’s health, increased at a 0.2 percent in the fourth quarter of last year, defying economists’ expectations of contraction.
Private economists had predicted it would shrink 1 percent.
The unexpected growth was the result of consumers rushing to buy new cars and the government beefing up spending.
“We are positioned very well for a recovery here,” said Diane Swonk, chief economist at Bank One in Chicago.
Companies probably will shed more jobs over the next few months, even as the economic outlook brightens.
A crucial January employment report from the Labor Department tomorrow is expected to show a continued falloff in jobs outside the farm sector, albeit a much smaller decline than in previous months.
Analysts in a Reuters poll forecast that companies trimmed 27,000 jobs in January, after cutting 124,000 in December.
According to that poll, the unemployment rate is expected to inch up to 5.9 percent, the highest level since April 1995, from 5.8 percent.
Overall, however, government officials remained cautiously optimistic about the prospect of the recession ending.
Fed Chair Alan Greenspan told Congress last week the economy appears to be turning a corner.