That's the message implicit in the Federal Reserve's latest survey of businesses around the country, which found economic activity stabilizing or improving in most regions.
Economists warn the expansion is fragile and will have staying power only if consumers start spending more money. Rising unemployment that keeps Americans cautious could make for a plodding recovery in the months ahead.
All but one of the Fed's 12 regions indicated economic activity either was "stable," showed "signs of stabilization" or had "firmed," according to the Fed's survey. The one exception was the St. Louis region, which reported the economic decline is "moderating."
Businesses in most Fed regions said they were "cautiously positive" about the economic road ahead. The survey, known as the Beige Book, does not include precise figures.
Analysts predict the economy is growing in the current quarter, which ends Sept. 30, at an annual rate of 3 percent to 4 percent. That's mostly because businesses, which had slashed investments during the recession, are spending more.
Auto sales have been lifted by the government's recently ended Cash for Clunkers program. Manufacturing and the battered housing market, which led the country into recession when it collapsed, have also shown signs of improvement.
The problem for the economy is that the expected growth this quarter comes mainly from the auto companies and other manufacturers, which are refilling their depleted stockpiles.
Those inventories had dwindled as factories and retailers sought to bring what they had more in line with reduced sales. Any robust growth in the economy might be short-lived if shoppers don't step up their spending.
In the Fed survey, most regions of the country reported that the clunkers program had boosted sales. Other merchants struggled. And consumer spending remained soft in most places.
Still, the assessments of businesses on the front lines of the economy were brighter than those they provided for the last edition of the Fed survey in late July.
At that time, most regions of the country reflected only that the recession was easing its grip. "That's a pretty significant change in tone from the previous Fed report," said Brian Bethune, economist at IHS Global Insight.
In Wednesday's survey, the Dallas region indicated that economic activity had "firmed." The Fed regions of Boston, Cleveland, Philadelphia, Richmond and San Francisco mentioned "signs of improvement." The Atlanta, Chicago, Kansas City, Minneapolis and New York regions described activity as "stable or showing signs of stabilization."
The survey's findings will figure into discussions when Fed Chairman Ben Bernanke and his colleagues meet Sept. 22-23. The Fed is expected to keep interest rates at record lows, probably for some time, to help nurture the recovery.
"There are presently some signs that the economy is stabilizing and even reviving in certain areas, despite mixed signals," Richard Fisher, president of the Federal Reserve Bank of Dallas, said in a speech in Texas.
In most regions, manufacturers reported "modest" improvements. In and around San Francisco, orders rose for semiconductors. Richmond, Atlanta, Chicago and Minneapolis reported increases or planned increases in automobile production. Several regions noted more production for prescription drugs.
The market for homes is still is still weak though it flashed some signs of improvement. In most places, buyer demand was stronger for cheaper homes, and in and around Philadelphia sales were up for more expensive homes, too.
Fed regions credited a tax incentive for first-time home buyers with increasing sales. Home prices kept falling in most parts of the country, though in the Dallas and New York regions, the survey found prices "firming."
In a sign that lenders' efforts to help troubled mortgage holders may be helping, the number of U.S. households threatened with losing their homes held steady last month, RealtyTrac Inc. reported Thursday.
The number of foreclosure-related filings including default notices, scheduled auctions and bank repossessions remains 18 percent higher than a year ago.
There was plenty of bad news in the survey. In the commercial real estate market, demand stayed weak, and construction fell in all parts of the country. And the job market was still sickly all over the nation.
The nation's unemployment rate, which stood at 9.7 percent in August, could top 10 percent this year. Fisher, of the Dallas Fed, called for "uncomfortably high unemployment" as businesses keep cutting costs.
After the sudden growth expected in the current quarter, many analysts expect the economy to slow a bit through the rest of this year and into 2010.
The Fed's survey found that staffing companies in most of its regions saw a pickup in demand for temporary workers. That's an encouraging sign: Employers typically use more temp workers before they hire new employees.
Still, several regions noted that businesses and local governments were imposing wage freezes or cutting compensation.
With the labor market weak, employers are keeping a lid on wages and helping hold down any inflation, the Fed report said. Expectations for a lethargic recovery will probably keep companies from jacking up prices as well, the report suggested.