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Here comes the recovery. Honest.


After several months of growing optimism about the state of the economy, suddenly there's a lot of concern that a recovery has come off the tracks.

A June employment report included an unexpected jump in job losses. That was followed by last week's report of a nearly 5% decline in June year-over-year sales at major retailers other than discounter Wal-Mart Stores (WMT, Fortune 500), which no longer releases monthly results.

The gloomier economic outlook has hurt stocks, and prompted talk among some economists and policymakers about whether a new round of economic stimulus is needed to get the economy growing sooner.

But there are still many economists who believe the early signs of a turnaround in the economy are there -- and growing.

They're not saying the recession that started 19 months ago is already over. But many believe the economy will reach bottom and finally start to improve as soon as late summer. Some even believe employers could again start adding jobs before the end of this year.

"It would have certainly been better if the jobs report had continued to show improvement," said Lakshman Achuthan, managing director of Economic Cycle Research Institute, which specializes in calling when the economy will turn from recession to recovery and back again. "The fact that after a few steps forward we had a step back doesn't negate the indicators pointing to a recovery this summer."

Reasons for encouragement: There are several factors accounting for these economists' optimism...

Achuthan said two factors giving him hope are that the financial stimulus bill passed earlier this year has yet to have much effect on spending and jobs, and that credit markets are still constrained by troubled assets due to the problems in the housing market and foreclosures. He said it's possible both those things could change quickly before the end of the year.

"If the stimulus dollars start to hit, and the financial system starts to behave more normally, there is a wall of money that will begin to flow through the economy," he said.
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