Released: September 16, 2008

Financial crises have slowed but not halted U.S. economy

Source: Michael Fletcher, Washington Post (Free Registration)

Even as the meltdown of the housing and mortgage markets has deflated home values, touched off a rush of foreclosures, triggered a federal bailout of the mortgage giants Fannie Mae and Freddie Mac, and resulted in a massive restructuring on Wall Street, the larger economy has muddled on.

Since the housing problems began to boil over last year, the economy has continued to expand. Boosted by federal stimulus payments, the country’s gross domestic product grew at a 3.3 percent annual pace in the second quarter of this year, making up for anemic growth the quarter beforehand.

There are some signs, including a rapidly rising unemployment rate, that the economy is now entering a darker phase. But many analysts call the growth so far this year—halting and tepid as it may be—evidence of the strength and resilience of the U.S. economy, which they say has evolved in ways that so far have allowed it to absorb the shocks to the housing and financial sectors.

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