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Economic outlook still uncertain

Analysts question whether recovery from recession in U.S. and overseas will have long-term effects.

WASHINGTON — Turnabouts in European and Asian economies, along with recent gains in the U.S., are raising hopes that the worldwide recession is drawing to a close. That’s not to say the coast is clear.

The brightening outlook in Europe and Asia and the improvement in U.S. credit markets and indicators reflect heavy government stimulus spending. Many analysts question whether the top economies can sustain recoveries after stimulus measures and easy-credit policies have run their course — and in the absence of significant new consumer spending, especially among Americans.

“It’s not clear that these economies can continue to move forward without stimulus,” said Mark Zandi, chief economist for Moody’s Economy.com. “And that’s in part why stock markets across the globe are nervous.”

It will be difficult for other countries to pull out of recession until the U.S., still one quarter of the world economy, starts growing, he said.

After a frightening free-fall across Europe in late 2008, France and Germany, the continent’s two largest economies, reported recently that they had grown slightly in the second quarter of 2009. Other major European countries reported they were still struggling, but with generally improved figures over late 2008 and earlier this year.

China, Japan, Hong Kong, Singapore and South Korea have also reported rebounds as government stimulus efforts across the globe have begun to show results.

Russia, among the hardest hit of major economies as oil prices slumped and many foreign investors fled the country, appeared to be stabilizing.

Meanwhile, in the United States, the Federal Reserve said the world’s largest economy appeared to be “leveling out” and many economists see a second-half rebound.

It all adds up to an improving picture.

But until American consumers begin spending again, and so long as jobs are still being lost, the durability of any recovery is questionable. Major retailers reported this week that U.S. consumers are continuing to rein in spending on all but basics.

Despite slight recent improvements in many U.S. economic statistics, many consumers haven’t seen a change in their lives.

So many jobs have been lost — nearly seven million since the recession began in December 2007 — that the unemployment rate will remain high long after the economy begins to rebound.

Many out-of-work Americans have lost unemployment and severance benefits and are depleting their savings. Others are saving more and spending less, still shaken from the worst economic downturn since the Great Depression.

“This is going to be the mother of all jobless recoveries,” said Allen Sinai, chief global economist for Decision Economics, a consulting firm.

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