Summers: Economy Has Moved Back From Catastrophe

08/17/2009 05:12 am ET | Updated May 25, 2011

WASHINGTON — President Barack Obama's top economic adviser has new cause for optimism. Back in January, Lawrence Summers said, Google searches for "economic depression" had increased by a factor of four. Today, the searches are back to pre-crisis levels.

For Summers, that is an economic indicator worth noting.

"If we were at the brink of catastrophe at the beginning of the year, we have walked some substantial distance back from the abyss," Summers said Friday.

Summer's upbeat tone, delivered in a speech to a Washington think tank, comes as the administration approaches its sixth month in office and as the public and members of Congress are becoming restless with Obama's economic policies. The administration is calling for patience to let its initiatives take hold.

Summers had other causes for optimism: The pace of economic contraction is slowing. Wall Street institutions that received government assistance are showing unexpectedly better earnings. On the other hand, unemployment climbing higher – at 9.5 percent now and expected to rise above 10 percent.

Summers, the director of the National Economic Council, said economic collapse looked all too real six months ago. "Fear was widespread and confidence was scarce," he said.

Now, he said, consumer sentiment has begun to improve. He conceded that unemployment is "substantially higher" and that job losses are greater than predicted last winter. Echoing Obama, he said he expected unemployment to rise in the coming months.

But he defended the administration's $787 billion economic stimulus, saying it was proceeding on schedule and that the peak of its impact on jobs is not expected until the end of 2010.

He said the improved health displayed by some large Wall Street firms would not have been possible without government infusions, guarantees and other programs provided by the government.

"There is no financial institution that would be reporting the kind of positive results that we have seen in the last quarter but for the extraordinary public support provided by the government," Summers said.

Speaking at The Peterson Institute for International Economics, Summer said that the ability of certain large banks to pay the Treasury back for large infusions of taxpayer money is a "positive and favorable sign."

"It's crucial to recognize that the increased health of financial firms is a positive indicator for the economy," he said.