President Barack Obama addresses the Ghanaian Parliament in Accra, Ghana July 11, 2009 - - "Some of you know my grandfather was a cook for the British in Kenya, and though he was a respected elder in his village, his employers called him "boy" for much of his life. He was on the periphery of Kenya's liberation struggles, but he was still imprisoned briefly during repressive times. In his life, colonialism wasn't simply the creation of unnatural borders or unfair terms of trade -- it was something experienced personally, day after day, year after year. My father grew up herding goats in a tiny village, an impossible distance away from the American universities where he would come to get an education. He came of age at a moment of extraordinary promise for Africa. The struggles of his own father's generation were giving birth to new nations, beginning right here in Ghana. (Applause.) Africans were educating and asserting themselves in new ways, and history was on the move. But despite the progress that has been made -- and there has been considerable progress in many parts of Africa -- we also know that much of that promise has yet to be fulfilled. Countries like Kenya had a per capita economy larger than South Korea's when I was born. They have badly been outpaced. Disease and conflict have ravaged parts of the African continent." Speech

President Barack Obama claimed on Saturday that his administration has pulled the US economy "back from the brink" and laid the foundation for prosperity. Meanwhile, New York University professor, Nouriel Roubini, popularly known as "Dr. Doom," sees the pace of contraction slowing.

The president said in his weekly address that the economic stimulus plan has slowed the rate of job losses, extended unemployment and health insurance to those who have lost jobs and given $43 billion in tax relief to families and businesses.

"As a result of swift and aggressive action we took in the first few months of this year, we've been able to pull our financial system and our economy back from the brink,"Obama said.

He termed the $787 billion American Recovery and Reinvestment Act the"largest and most sweeping economic recovery plan in our nation's history."

The recovery act, he said, has "helped end the economic free fall," stabilising financial institutions, increasing lending to families and businesses and helping families pay their mortgages and avoid foreclosure.

"This recovery act has worked as intended," Obama said.

He urged patience, stressing the plan was not designed to work in four months, but in two years.

"This year has been and will continue to be a year of rescuing our economy from disaster,"Obama said.

Republicans called the spending plan a ''flop'' and said it hasn't fulfilled its hype. They criticised the White House for increasing the federal deficit - - which is mainly inherited from President Bush - -  and doing little to combat an unemployment rate that hit 9.5% in June. The broader measure that includes discouraged workers and part-timers seeking full-time positions, rose to 16.5%.

''The reality is it hasn't helped yet,''said Senator Jon Kyl of Arizona . ''Only about 6.8% of the money has actually been spent. What I proposed is, after you complete the contracts that are already committed, the things that are in the pipeline, stop it.''

America's best-known investor Warren Buffett said Thursday he believes one "may well be called for," arguing that the first one "was sort of like taking half a tablet of Viagra and having also a bunch of candy mixed in."

The worst may not be over for the economy, President Obama's top White House economic advisor Lawrence Summers, said in an interview published by the Financial Times, last Saturday.

“I don’t think the worst is over ... It’s very likely that more jobs will be lost. It would not be surprising if GDP has not yet reached its low,"Summers said."What does appear to be true is that the sense of panic in the markets and freefall in the economy has subsided and one does not have the sense of a situation as out of control as a few months ago.”

The former Clinton administration treasury secretary and now head of the National Economic Council said, the aspiration is that once this crisis is over, the US economy will be in different, and better, shape than it was before the bust.

This new American economy, Summers hopes, will be “more export-oriented” and “less consumption-oriented”; “more environmentally oriented” and “less energy-production-oriented”; “more bio- and software- and civil-engineering-oriented and less financial-engineering-oriented”; and, finally, “more middle-class-oriented” and “less oriented to income growth that is disproportionate towards a very small share of the population”.

The FT said unlike many other economists, Summers does not believe that lower growth is the inevitable price of this economic paradigm shift.

The newspaper said Summers admits that this rosy scenario depends on a lot more than the White House. Foreign policy watchers have tended to focus on the security issues this administration faces - - the wars in Iraq and Afghanistan, the challenges of Iran and North Korea’s nuclear ambitions. But Obama’s most important international assignment may turn out to be coaxing the rest of the world into accommodating this reshaping of the US economy.

As Summers puts it, “The global imbalances have to add up to zero and so, if the US is going to be less the consumer importer of last resort, then other countries are going to need to be in different positions as well.” On this possibility, Summers is bullish. “The very great enthusiasm for accumulating reserves that one saw globally is likely to be a smaller factor over the next decade than it has been in recent years,” he predicts.

Nouriel Roubini: Remains gloomy but sees pace of contraction slowing

Professor Nouriel Roubini of New York University, known as "Dr. Doom," is showing some glints of optimism.

Roubini's RGE Monitor newsletter says in a commentary on the US economy: The United States is in the 20th month of a recession that has been by far the longest and most severe of the post-war period.  While comparisons with the Great Depression are frequent and appropriate (especially if we look at the pace of contraction in industrial production), the aggressiveness of policy measures has significantly reduced the probability of a near-depression…. The general consensus is that this recession will end sometime in the second half of 2009…. We also expect the pace of contraction of economic activity to slow significantly.  We forecast negative real GDP growth in Q2 2009 and Q3 2009, and for real GDP to remain flat in Q4.  After the sharp contraction in economic activity in 2009, growth will reenter positive territory only in 2010, and then at a very sluggish rate, well below potential.

Even if economic activity stops contracting by the end of 2009, that might not mark the official end of this recession.  Recessions are not measured exclusively by GDP contractions.  Unemployment, industrial production, real manufacturing, wholesale retail trade sales and real personal income (less transfer) are all considered when it is time for the National Bureau of Economic Research (NBER) to put dates around recession periods….U.S. real GDP will stop contracting at the end of 2009, but it is likely that many of the above indicators will not bottom out (or peak, in the case of unemployment) before mid-2010.

Improvements in real economic activity are present and visible in the reduction of the pace of job losses, in the improvement in indicators of manufacturing activity, in the stabilization of housing starts and in the improvement of financial conditions.  However, RGE Monitor does not yet see signs of a strong and sustainable recovery.

Job Losses Outpace GDP Decline

Roubini's RGE Monutor says labor market conditions are still quite dire, more than 3.4 million jobs have been lost in 2009 and about 6.5 million have been lost since the beginning of the recession.  Compare this with the 2.5 million jobs lost in the recession of 2001; 1.5 million lost in the recession of the early 1990s; 3 million in the one of the early 1980s; 2.2 million in the one of the 1970s.  The pace of job losses has fallen from the 600K plus per month registered between December and March 2009 to about 350K in May and 467K in June; the average monthly job losses in this recession is now at about 360K.  While the recent slowing of losses is a positive development, we have to put this in perspective: in previous post-war recessions, average monthly job losses have ranged between 150 thousand and 260 thousand.  Moreover, average weekly hours in private nonfarm payrolls are at the lowest since 1964, as employers have cut employees’ hours.  Job openings and turnover openings continue to fall and are at the lowest levels since 2000, indicating continued weakness in the economy.

US broker Alliance Bernstein'seconomist Joseph Carson said last week in a research note, that job losses in prior downturns have been roughly proportional to the decline in gross domestic product. But in the current recession, the proportion of jobs lost is running about a third greater than the drop in real GDP.

The correlation between GDP growth and unemployment is called Okun’s Law, after the late economist Arthur Okun who published research on it it in the 1960s. The numerical relationship that Okun estimated - - and other economists have since refined - - has broken down. The original estimate suggested about a 3% decline in GDP for every 1% increase in unemployment. Fed chairman Ben Bernanke and fellow economist Andrew Abel, suggested about a 2% decrease in output for every 1% increase in unemployment.

Carson said in his note that about 40% of the spike in the unemployment rate in the early 1980s came from new entrants to the workforce who couldn’t immediately find jobs. Now, only 25% of the increase in joblessness is due to new entrants. The rest is from job loss.

The other side of the coin: this downturn apparently has yielded “unprecedented gains” in productivity. “Improved productivity levels reflect an extremely lean corporate sector that should be capable of generating profit growth at much lower levels of GDP growth than in the past,” Carson wrote.“By improving productivity during a recession, companies may even be able to generate extraordinarily strong and sustained productivity and profit gains when the economy reverts to more normal levels of activity. In time, a recovery in corporate profits will generate the need for additional labor.”