WASHINGTON (AP) – Evidence is piling up that the worst part of the recession has ended. But that doesn’t mean the pain is over.

A better-than-expected unemployment report Friday – job losses declined to the lowest level in six months – capped a week of encouraging news, including firmer home sales, a revival in consumer spending and fresh optimism about the biggest U.S. banks.

The economy remains vulnerable to further shocks, and 13.7 million people are unemployed. The jobless rate rose to 8.9 percent in the new report and still seems headed for a stinging 10 percent.

Yet confidence is building that the recession, the longest since the Great Depression, will end this summer or fall, setting the stage for a slow recovery.

Pointing to recent improvements, President Barack Obama said Friday “the gears of our economic engine do seem to be slowly turning once again.”

By some measures, the darkest months have passed. The plunges in economic activity and rising waves of layoffs, seen from the end of 2008 through the start of this year, seem to have subsided.

“The winds are still howling, but I think we can see the sunlight on the distant horizon,” said Mark Zandi, chief economist at Moody’s Economy.com. “Clearly, the job losses are moderating.”

Wall Street investors could see the sunlight, too. The Dow Jones industrials gained nearly 165 points and finished 4.4 percent higher for the week. It was the eighth gain for the index in nine weeks.

The economy probably is still shrinking in the current quarter but only at about half the pace – around 3 percent – that it had in the prior six months, the worst in 50 years. Businesses are expected to be cutting back far less on things like home building, commercial construction, equipment and software. And factories could then boost production to replenish razor-thin stockpiles of goods.

Many believe the economy could start growing again by summer or, more likely, by the final quarter of this year, as the impact of tax cuts and increased government spending on big public works projects contained in Obama’s $787 billion stimulus package takes hold.

Job losses are expected to continue through the rest of the year, but are likely to be smaller in number.

Losses averaged 700,000 a month in the first quarter but dropped to 539,000 in April, according to Friday’s Labor Department report. They should average around 500,000 in the current quarter and taper off to 250,000 a month in the final quarter of the year, according to some projections.

That’s probably cold comfort to Tara Barrone, 28, of McLean, Va., who was checking out job prospects at the Secret Service at a career fair Friday.

“Government jobs are popular because of the sense of stability,” she said. “I know I’m looking for a sense of security and permanency after being laid off twice in the last year.” The lines at the Secret Service booth were much longer than at other recruiters.

Federal Reserve Chairman Ben Bernanke earlier this week gave his most optimistic prediction yet about the end of the recession. He said he expects the economy to start growing again this year – though the comeback could be weak and more jobs will disappear even after a recovery takes hold.

A burst of hiring by the federal government to prepare for the 2010 Census played a big role in the April improvement. Smaller payrolls cuts at construction companies, factories, retailers and financial services also factored in.

The unemployment rate, however, climbed to 8.9 percent, the highest since late 1983. It will probably keep rising the rest of the year, even if monthly job losses continue to slow. Companies won’t spring into hiring mode until they feel confident that an economic recovery is firmly rooted.

The Fed says unemployment will remain elevated into 2011. Economists say the job market may not get back to normal – meaning a 5 percent unemployment rate – until 2013.

If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate in April would have been 15.8 percent, the highest in records dating back to 1994. The total number of unemployed now stands at 13.7 million.

Still, a string of reports out this week suggested the recession is finally starting to lose its bite and the economy is stabilizing.

• The number of newly laid-off workers filing applications for jobless benefits plunged to the lowest level in 14 weeks.

• Sales at many retailers fared better in April, with Wal-Mart Stores Inc. leading the way.

• Construction spending rose in March, the first increase after five straight months of declines. An index of pending home sales also ticked up.

• The U.S. services sector contracted in April at a slower pace than the prior month.

• Government exams of the nation’s biggest banks helped lift a cloud of uncertainty that has hung over the economy.

Those “stress test” results – a key administration effort to boost confidence in the financial system – showed nine of the 19 biggest banks have enough capital to withstand a deeper recession. Ten must raise a total of $75 billion in new capital to withstand possible future losses.

Taken altogether, the recent news provides “very clear signs that we are making progress toward reaching a bottom, which is the first step you need to accomplish before you can achieve a turnaround,” said Ken Mayland, president of ClearView Economics. “A recovery is now in sight.”

However, the housing, credit and financial crises – the worst since the 1930s – have racked up a lot of damage, and it could take years to get back to normal.

Since the recession began in December 2007, the economy has lost a net total of 5.7 million jobs. The 741,000 lost in January were the most since the fall of 1949.

Job cuts have continued this week. Steelmaker Severstal International said it’s idling plants in West Virginia and Ohio, resulting in 3,100 layoffs. Microsoft Corp. said it was starting thousands of the 5,000 job cuts it announced earlier this year and left the door open to even more.

As the recession eats into sales and profits, companies have turned to other cost-cutting measures, too. Those including holding down workers’ hours and freezing or cutting pay.

The average work week in April stayed at 33.2 hours, matching the record low set in March. And workers’ wages barely budged, meaning consumers will probably stay somewhat cautious in the months ahead. Average hourly earnings nudged up to $18.51, a 0.1 percent rise.

Slower job losses across a number of industries – along with 66,000 more federal jobs – helped to temper the overall payroll reductions in April. The pickup in federal employment was mainly due to the hiring of 63,000 temporary Census workers.

By fall, the Census Bureau expects to have hired 1.4 million workers. Stephen L. Buckner, a Census Bureau spokesman, said turnover and finding qualified applicants haven’t been a problem, “with the economy the way that it is.”

Labor Secretary Hilda Solis, wouldn’t speculate on the future pace of layoffs but warned that some of the jobs lost “may not come back.” She urged jobseekers to get training and education to be contenders for work in growing industries, such as health care, which added nearly 17,000 jobs in April.

Obama asked states and colleges to help jobless people pursue education and training without losing their unemployment benefits. States generally require people who collect unemployment to be actively looking for work, which can make it difficult to sign up for school or job training. Under Obama’s plan, going to school would satisfy the requirement that they were seeking new employment.

“We’re still in the midst of a recession that was years in the making and will be months or even years in the unmaking,” Obama said. But he added: “Step by step, we are making progress.”


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