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September 11, 2009

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US economy finally expands

THE recession is ending and the United States economy is finally growing again.

That's the message implicit in the Federal Reserve's latest survey of businesses around the country, which found economic activity stabilizing or improving in most regions.

Economists warn the expansion is fragile and will have staying power only if consumers start spending more money. Rising unemployment that keeps Americans cautious could make for a plodding recovery in the months ahead.

Wall Street economists expect that first-time claims for unemployment insurance benefits for last week fell to a seasonally adjusted 560,000 from 570,000 the previous week, according to a survey by Thomson Reuters.

Economists closely watch initial claims, which are considered a gauge of layoffs and an indication of companies' willingness to hire new workers.

While the figures are volatile, first-time claims have trended downward in recent months. Initial claims topped 600,000 for most of this year, until falling below that level in early July.

The total number of people receiving benefits, meanwhile, is expected to drop by about 30,000 to 6.2 million. The figures on so-called continuing claims lag initial claims by a week.

All but one of the Fed's 12 regions, meanwhile, indicated economic activity either was "stable," showed "signs of stabilization" or had "firmed," according to the Fed's survey.

The one exception was the St Louis region, which reported the economic decline is "moderating."

Businesses in most Fed regions said they were "cautiously positive" about the economic road ahead. The survey, known as the Beige Book, does not include precise figures.

Analysts predict the economy is growing in the current quarter, which ends on September 30, at an annual rate of 3 percent to 4 percent.

Auto sales have been lifted by the government's recently ended Cash for Clunkers program. Manufacturing and the battered housing market, which led the country into recession when it collapsed, have also shown signs of improvement.


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