April 26, 2009 / 1:43 PM / 11 years ago

Summers says no unremitting freefall in economy

WASHINGTON (Reuters) - The sense of “unremitting freefall” in the U.S. economy has disappeared and the picture is no longer completely negative, but rather mixed, President Barack Obama’s economic adviser Lawrence Summers said on Sunday.

Lawrence Summers, director of the White House National Economic Council, speaks on "Responding to an Historic Economic Crisis: The Obama Program," at the Brookings Institution in Washington March 13, 2009. REUTERS/Molly Riley

Speaking on “Fox News Sunday,” Summers also said he was hopeful that the auto negotiations between Chrysler and Italian carmaker Fiat SpA would work out.

“Six or eight weeks ago, there were no positive statistics to be found anywhere. The economy felt like it was falling vertically. Today, the picture is much more mixed,” Summers said.

“There are some negative indicators, to be sure. There are also some positive indicators. And no one knows what the next turn will be. But I think that sense of unremitting freefall that we had a month or two ago is not present today. And that’s something we can take some encouragement from,” he added.

Summers also said U.S. economic imbalances cannot continue forever and the United States was on a path toward containing the economic downturn and toward recovery.

Summers said he expects to see sharp declines in employment for quite some time this year. Even with a strong response from the government to try to jump-start the economy, history shows it takes some time, six months or more, for a stimulus to work its way through and job creation to begin, he said.

“I suspect the economy will continue to decline for some time to come,” Summers said. But he noted that the consensus among economic forecasters suggests the economy will perform better by the end of the year.

Specifically, Summers noted traditional cycles in recessions in which companies will sell off inventory and then have to start rebuilding. He said inventory rebuilding will be a source of momentum going into the second half of the year.

The slowdown in car sales and homes cannot continue forever, he said, noting that at some point demand for cars will pick up as those currently in service begin to wear out.

Also the stock of homes on the market will diminish and home construction will pick up.

“These imbalances can’t continue forever and when they are repaired they will be a source of impetus to the economy. Just what the timing will be no one can know,” Summers said.

Regarding the Chrysler-Fiat negotiations, Summers said there are some issues that have been worked out and some that remain.

“But it’s in everybody’s interest, we believe, to see these negotiations succeed. And we’re hopeful that they will. It’s obviously a situation that we’re monitoring carefully,” Summers added.

Reporting by Will Dunham and Donna Smith, editing by Patricia Zengerle

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