Reporting from Washington -
The economy is improving according to most yardsticks, but fresh evidence emerged Tuesday that the path to revival could resemble a Thanksgiving holiday road trip — long, slow and stressful.
Hopes for a strong rebound from the recession are fading as the government Tuesday downsized its estimate of economic growth in the third quarter to 2.8% from its earlier calculation of 3.5%.
And despite huge stimulus spending from Washington and historically low interest rates, the Federal Reserve expects the economic recovery to remain weak into next year, with the economy unable to gather steam until 2011, according to minutes released Tuesday of its latest meeting.
“The recession is over largely due to” the government’s efforts to stimulate the economy, said Mark Zandi, chief economist at Moody’s Economy.com, “but the recovery remains very fragile.”
Troubles persist in the real estate market, where a budding recovery in home prices shows signs of stalling and a surge in foreclosures of commercial properties looms. Consumers remain unusually downbeat, holding back their spending. And the unemployment rate, which hit 10.2% last month, is such a concern that President Obama will convene a White House summit next week to find new ways to create jobs.
Nowhere is the sluggish recovery more evident than in the woes of the nation’s banks.
Although the industry’s bottom line improved slightly in the third quarter, the sector’s condition remains delicate. The Federal Deposit Insurance Corp. said Tuesday that the number of banks in danger of failing jumped to 552 at the end of September, the highest level in 16 years. And the federal fund that makes good on deposits at banks that go under is officially in the red for the first time since 1992.
Banks continued to set aside more money to cover potential loan losses, limiting the amount they can lend. As a result, the dollar amount of loans on the books of U.S. banks fell in the latest quarter by the largest percentage since at least 1984, making a strong economic recovery more difficult.
“There are no …
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