WASHINGTON -- The Bush administration yesterday officially buried the recession and proclaimed that economic recovery is under way.
"We do see, over the last couple of months, the signals that the actual turnaround has begun," said Michael Boskin, chairman of the President's Council of Economic Advisers, in a meeting with White House reporters.
Mr. Boskin, citing a large number of recent economic reports from the government, said he expects the pace of recovery to be modest by historic standards, and he predicted some regions of the United States will lag behind others. Moreover, he cautioned, the unemployment rate may edge higher because it takes time for companies to step up their hiring processes.
But the main message was that better U.S. economic performance is in the works, a view the administration had refrained, until now, from publicly avowing as officials waited for more data. The bond market, however, has been anticipating a recovery for some time, pushing interest rates higher.
The Commerce Department reported yesterday that personal income in May advanced 0.5%, the fourth consecutive monthly increase and the biggest advance all year. Gains in wages and salaries were widespread in all types of business, the figures showed. In addition, personal spending, which accounts for two-thirds of U.S. output of goods and services, jumped 1.1% after falling 0.4% in April.
On Tuesday, the government reported that orders to U.S. manufacturers for durable goods shot up 3.8% in May. The increase was the biggest advance in 14 months and followed a healthy rise of 3.6% in April orders.
Mr. Boskin did not make any direct comments on Federal Reserve policy, but he did say several times that it is important to make sure the recovery is sustained. The Federal Open Market Committee is scheduled to meet next week, and analysts expect members to leave policy on interest rates unchanged.
Mr. Boskin said the administration expects real gross national product to rise to 3% from 2.5% in the second half of this year. Inflation, he added, "appears to be on a downward track" and will probably be "considerably lower" this year, compared with 1990. Last year, consumer prices rose 6.1%, but this year many private economists expect inflation to be only around 4%.
In a semiannual forecast released yesterday, the economic advisory committee of the American Bankers Association projected that real GNP will advance at an annual rate of about 2.5% over next 18 months. The bankers' panel predicted that inflation will remain moderate, with the consumer price index rising 4.1% this year and only 3.4% in 1992.
Members of the bankers' group met Wednesday with Fed officials to present their forecast, which calls for the Fed to maintain an accommodative monetary policy to ensure that the recovery continues. That means allowing growth in the M2 measure of the money supply in the upper band of the Fed's target range of 2.5% to 6.5%, the panel said.