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Recession over, but US not looking up -

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LEIGH SALES, PRESENTER: The US Federal Reserve has revealed what everyone's been sensing: the
economic recovery's happening far slower than anticipated.

The housing market remains flat, foreclosures are still rising, unemployment's high and the growth
outlook is poor.

The recession may be over, but it's no wonder it's hard to convince Americans things are looking
up. North America correspondent Lisa Millar reports.

LISA MILLAR, REPORTER: These are the prosperous streets of downtown DC, an area young professionals
call home. But even here, behind these ornate doorways lies the evidence of America's downturn.

DUANE, HOMEOWNER: And then here's what's left of the bedroom. So, ...

LISA MILLAR: That's it?

DUANE: It's an air mattress. It works.

LISA MILLAR: A self-employed industrial designer who once earned six figures, Duane is now weeks
away from losing his home.

DUANE: Just sick. It's just a bad place. And the only thing I can look at is the only way to go
from here is up. 'Cause, I mean, like I said, worst case, I'm gonna lose it, then I'll just have to
start over and it's - I'll deal with that when that comes.

LISA MILLAR: This is the legacy of the crisis that swept across the country. One in four homeowners
still owes more on their mortgage than their properties are worth. Foreclosures reached a new peak
in June and home values aren't expected to reach rock bottom until late this year.

KATHLEEN DAY, CENTRE FOR RESPONSIBLE LEARNING: Every foreclosure that happens has a reverberation;
it lowers surrounding property values. So of course that causes unemployment and erodes the tax
base so you have less money for essential services like schools and hospitals.

And then, of course, that means that more people fall into foreclosure and it begets more
joblessness. So it's almost a reverse bubble, and you needed to pierce that, we need to pierce

LISA MILLAR: On Capitol Hill before the Senate Budget Committee, top economists delivered the bad

SIMON JOHNSON, MASSACHUSETTS INSTITUTE OF TECHNOLOGY: So we're on track if we are pessimistic about
the second half of this year to experience essentially a lost half decade of growth in the United

JOEL NAROFF, NAROFF ECONOMIC ADVISORS: I'm in the camp that is extremely concerned about growth
over the next year, and that the damage done from the bursting of both the housing bubble and the
near-collapse of the international financial system cannot be cured in a relatively short period of

LISA MILLAR: That damage is being seen across the country. The Pentagon's announced massive cuts,
citing harsh economic realities, and state and local governments are waiting for an emergency aid
package from Congress to prevent more sackings.

BARACK OBAMA, US PRESIDENT: With so many Americans unemployed or struggling to get by, states have
been forced to balance their budgets with fewer tax dollars, which means that they've gotta cut
critical services.

LISA MILLAR: But even those more confident about the economy are finding it tough. Redha Morsli's
technology consulting company, FedSolutions, has been averaging growth of 400 per cent for the past
three years.

REDHA MORSLI, FEDSOLUTIONS PRESIDENT: Bringing on more clients, more clients, which we do a very
good job at, requires more staff to support and also requires more overhead, and to do that we need
to have a little bit more operational money.

LISA MILLAR: While banks are under pressure to open up credit, for this entrepreneur, money is hard
to come by.

REDHA MORSLI: It's definitely not the case for us, I can tell you that. We've recently interviewed
with about 32 different banks and I would say 31 of them were not lending.

LISA MILLAR: A senior economist, Joe Gagnon, spent 25 years at the US Federal Reserve and US
Treasury, including time with the Reserve Bank of Australia.

JOE GAGNON, INSTITUTE FOR INTERNATIONAL ECONOMICS: I think what we're seeing is a sub-par recovery.
I think a double dip, a true double dip is extremely unlikely, rarely happens unless there's a
really drastic policy actions to make it happen. But we are not growing fast enough to get the
unemployment rate down, that's clear.

LISA MILLAR: But jobs aren't being created because the economy's not growing and the housing market
is still weak because unemployment is still high.

The problem for this administration is how do you break that cycle? The stimulus package is
credited with having helped initially, although not enough to boost the growth rate and most of the
experts believe that without changes to monetary and fiscal policy, America's economy will continue
to stall.

For those at the bottom, that kind of action may not come fast enough.

Lisa Millar, Lateline.