Green shoots?

The Great Recession of 2007-2009 is over. So says the International Monetary Fund, the Conference Board and a host of private economic forecasters. President Barack Obama and Treasury Secretary Tim Geithner aren’t prepared to go that far, but they do see hopeful signs that problems are easing.

Federal Reserve chairman Ben Bernanke said Friday that “economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good.”

Wall Street reacted jubilantly, but on the streets where many Americans struggle to pay their bills, reaction was more restrained. You can’t eat anticipated GDP, much less shop for Christmas with it. For every hopeful sign, there is an equal and opposite negative trend.

Recovery, if true, is going to be very slow. For now, its benefits are felt mainly at the top of the income scale. Those in the middle and lower income groups must hope that the benefits slowly will trickle down to them.

Last week, even as “green shoots” were spotted in some quarters (sales of existing houses were up), crabgrass was thick in other quarters:

• The Labor Department reported that the number of new unemployment claims rose to a seasonally adjusted 576,000. It was the second straight week of higher jobless claims.
• The Mortgage Bankers Association reported that 9.24 percent of all residential loans were delinquent in the second quarter of the year. Another 4.4 percent of residential loans — one in 25— were in foreclosure.
• The Commerce Department reported that retail sales fell 0.1 percent in July; economists had expected a gain of 0.7 percent.
• The “cash for clunkers” program helped car sales recover in July, but they still were down from a year earlier. With the program out of money as of Monday, some analysts are predicting continued slower sales this fall.

Blame it on the middle class. The GDP is heavily reliant — 70 percent — on consumption, and middle-class Americans — those in the 40th to 90th percentile of American earners — account for 46 percent of all consumption.

But middle class Americans (whose net worth largely is in their homes) don’t have money to spend. A Bank of America-Merrill Lynch report estimates their debt-to-disposable income ratio is 205 percent. Many owe more on their homes than the homes are worth. Many are worried about their jobs. They’re paying down debt and saving for more rainy days.

Historically, recovery occurs when middle-class Americans are confident enough about the future to spend and take on more debt. That kind of recovery might be a long time coming. That may not be entirely bad.

Right before the bubble burst, America recorded two straight years of negative savings rates — the country spent more than it saved. In the decades after the Great Depression, people didn’t do that. We’ll see how long the lesson lasts this time.