Is the Economy Starting to Recover? Or Just Less Bad?

Is the Economy Starting to Recover? Or Just Less Bad?

Could it be that things are beginning to get better for the U.S. economy?

Nope, no real chance of that. But a spate of somewhat better-than-expected economic numbers this week and last has forecasters declaring that the pace of decline seems to have slowed. Such a slowing has to happen before things start to improve. Which could mean that we’re seeing the beginning of the beginning of the end of this nasty recession.

Then again, we might not be — and premature optimists have been punished several times already during this downturn. So the people who make a living calling the twists and turns of the economy have become almost comically cautious about declaring an inflection point. Some examples:

Wednesday’s stronger-than-expected data on durable-goods orders was a “slim silver lining on the horizon,” UniCredit Research economist Harm Bandholz wrote in a note to clients. But, he was quick to point out, “investment and exports continue to plummet.”

“The unexpected increase in orders in February marks a moderation relative to the incredibly weak data in January,” wrote Michelle Meyer of Barclays Capital in response to the same durable-goods data. “However, we do not interpret today’s report as a signal of the end of the downturn in manufacturing.”

“We are prepared to hazard the view that the post-Lehman meltdown is now over and the market is stabilizing” is how Ian Shepherdson of High-Frequency Economics greeted Wednesday’s reported rise in new home sales. “That’s not the same as a recovery, but it is better than continued declines in sales.”

“While these developments provide some support for our expectation that housing will stabilize in coming months,” declared Kent Michaels of Goldman Sachs on Tuesday after running through other positive real estate data, “they fall well short of what would normally signal recovery in the sector.”

There are several reasons for all this caution among economists. One is that the numbers aren’t all that positive, and a few good days could easily give way to a disappointing run. Also, there’s a lot of noise in the data, and seeming turning points are sometimes just the product of flawed measurement and random chance.

Another issue is that while there are signs that housing and consumer spending in the U.S. are no longer in the free fall of a few months ago, other parts of the economy are still in sharp decline. To quote Shepherdson again: “The epicenter of the recession has shifted from the consumer to the corporate sector.” And it’s possible that corporate cutbacks could lead to a relapse among consumers. “The main downside risk probably lies in sharper-than-expected multiplier effects via the dramatic deterioration in the labor market,” warned Goldman Sachs economist Jan Hatzius on Monday after predicting that consumer spending would rise for the rest of the year. “Both the weekly and monthly labor market indicators still show an accelerating employment contraction.”

In other words, nobody really knows if we’ve hit a turning point yet. But it is at least ever so slightly encouraging that they’re starting to talk about one. Cast your votes for the TIME 100. See the best business deals of 2008.