Oct. 29--The government reported Thursday morning that the economy surged out of its longest recession since World War II and grew by 3.5 percent in the third quarter, spawning hopes for a lasting recovery.

The return to growth was fueled in part by two popular government programs the "cash for clunkers" auto trade-in program and a first-time homebuyers tax credit as well as a turnaround in manufacturing after the spring bankruptcy of two U.S. automakers.

But even as evidence of a recovery emerges, doubts are returning about whether the resumption of growth will last for only a quarter or two. High unemployment of nearly 10 percent has left more than 15 million people with no jobs and little income, raising questions about how much consumers can contribute to the recovery.

Moreover, recent reports have shown that a budding revival in the housing market may already be fizzling in anticipation of the expiration of the $8,000 homebuyers tax credit on Nov. 30. Consumer confidence also slipped last month amid rising joblessness, and auto sales have cratered by 35 percent since the expiration of the clunkers program this summer.

"The data highlighted concerns about continuing weakness in the American job market, and in turn raised doubts about the American consumers ability to generate growth in the economy," said David Starkey, a trader at Custom House, a Canadian investment firm.

"Its hard to imagine a U.S. recovery making any meaningful headway while unemployment is still rising."

While hopes for a recovery spurred gains of more than 50 percent in major stock indexes from March to October, news about a stall in the economy this week has renewed worries about the durability of the recovery in the stock market, sending the Dow Jones Industrial Average down by more than 118 points on Wednesday.

"The outlook for 2010 remains clouded," despite a strong upturn in manufacturing this summer with the reopening of auto plants shut down during the bankruptcy of GM and Chrysler and a movement toward restocking depleted inventories by businesses around the country, said Cliff Waldman, economist with the Manufacturers Alliance.

Inventory rebuilding may keep factories humming for a while longer, but "excess capacity will be an impediment to a business investment turnaround while a soft global economic rebound will likely preclude a strong recovery in overseas sales of U.S. manufactured goods," he said.

-----

To see more of The Washington Times or to subscribe to the newspaper, go to http://www.washtimes.com/.

Copyright (c) 2009, The Washington Times

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

A service of YellowBrix, Inc.