Plus: U.S. Economy’s Unexpected Bright Spot, Governments’ Expanded Payrolls, Eurozone’s Stabilizing Economy, Toyota’s Biggest-Ever Recall in China and MORE.

Has the Global Recession Ended?
The global recession is now over and a recovery has begun, according to Olivier Blanchard, the top economist for the International Monetary Fund (IMF).

Blanchard’s assessment isn’t all positive: “The turnaround will not be simple,” Blanchard wrote in an article released by the IMF last week. “The crisis has left deep scars, which will affect both supply and demand for many years to come.”

Even as recovery takes hold, “potential output may be lower than it was before the crisis,” the article, published in the IMF’s Finance & Development magazine, said. Economies may struggle to return to “normal” growth because of sluggish demand and even the return of growth will not be strong enough to reduce unemployment, which is not expected to crest until next year.

Remarks by Federal Reserve Chairman Ben Bernanke in addition to other scattered reports last week also suggest the global economy is now beginning to emerge from its worst crisis in generations.

“The prospects for a return to growth in the near term appear good,” Bernanke said last week, offering optimism about both the United States and the worldwide outlook. Like Blanchard, the Fed chairman re-emphasized his warning that the U.S. economic recovery was likely to be slow and arduous and that unemployment would remain high for another year.

17 States Report Unemployment Declines
“A rebound in the auto industry and federal stimulus money helped lower unemployment rates in many of the 17 states that reported drops in July — a hopeful sign after only five states had seen their jobless rates dip in June,” Christopher S. Rugaber of the Associated Press reported on Friday.

“Overall, 17 states and the District of Columbia reported lower unemployment rates in July — a significant improvement from June, when only 5 states experienced drops,” Rugaber noted in a separate AP story. The report also showed that 21 states added jobs last month, up from only 10 in June.

However, according to the U.S. Department of Labor’s Regional and State Employment and Unemployment report last week, joblessness remains widespread, with 26 states reporting higher unemployment rates. Fifteen states and the District of Columbia have unemployment rates above 10 percent.

State and Local Governments Expanded Payrolls During Recession
“While the private sector has shed 6.9 million jobs since the beginning of the recession, state and local governments have expanded their payrolls and added 110,000 jobs,” the New York Times reports.

According to a paper published by the Nelson A. Rockefeller Institute of Government last week, state and local governments steadily added jobs since the start of the recession in December 2007, with their employment peaking in August 2008. “Over the past year, total state-local employment rose in 30 states and declined in 16, with the remaining states unchanged,” the new report says.

The Times notes some of several possible explanations for the disparity between the private and public sectors: “There can be a short lag between an economic downturn and the time it hits states in the form of lower tax collections, and an even longer delay before the problems hit local governments in the form of reduced state aid and lower property tax collections.”

The institute’s report, issued on Thursday, points to “the slow pace of decision-making in many states, and the power yielded by politically influential unions,” while “billions of dollars of federal stimulus money sent to states helped them avert layoffs.”

Eurozone PMI Shows Economic Stability
On Friday, further evidence merged to suggest the 16 countries using the euro are on the verge of growing again following the latest recession.

“The euro zone’s private-sector output stabilized in August, marking the end of 14 months of contraction, with support from the first increase in manufacturing output since May last year,” the Wall Street Journal reports on new data from Markit Economics, a financial information company. “The data indicate the euro zone’s private sector is on the cusp of growth — a reading below 50 indicates output is contracting while a reading above 50 indicates it is expanding.”

Markit’s reading of the euro-zone composite purchasing managers’ index rose to “a 15-month high of 50 in August from 47 in July, following the biggest monthly increase on record.” The manufacturing sector’s PMI increased to 47.9 from 46.3, while the services sector swelled to 49.5 in August from 45.7 in July.

“The unprecedented downturn has been followed by an historically rapid rebound that positions the eurozone to post growth in the third quarter,” Rob Dobson, a senior economist at Markit, said. (Source: The (UK) Independent)

Despite the “clearly improving picture, analysts cautioned about expecting too much of a rebound in growth,” the AP notes.

U.S. Manufacturing an “Unexpected Bright Spot” for Economy
Factory output in the U.S. is growing for the first time since early last year, bolstering the case for an economic recovery.

“The U.S. economy has found an unexpected bright spot: manufacturing,” Canada’s Globe & Mail reports. “Aided by a rebound in European and Asian economies, a depreciating U.S. dollar that makes exports more attractive and record low inventories, the country’s factory sector is slowly returning to life, and has become an unlikely, if unreliable, standard bearer for the nascent U.S. recovery — even in the long-blighted Northeast.”

Regional surveys last week from Pennsylvania and New York show that manufacturers are gaining more confidence.

Manufacturing in the Philadelphia region this month expanded for the first time in almost a year. The Federal Reserve Bank of Philadelphia‘s general economic index climbed from -7.5 in July to 4.2 in August, the highest reading since November 2007. According to Bloomberg News, “it was the first positive reading, signaling expansion, since September.”

In New York, after more than a year of negative readings, the general business conditions index rose into positive territory. “For the first time in considerably more than a year,” the Empire State Manufacturing Survey indicates that “conditions for New York manufacturers have improved.” The general business conditions index rose 13 points, to 12.1, its highest level since November of 2007.

Housing Turns for the Better
For the first time in five years, existing-home sales have increased for four months in a row, building a case for recovery, according to the National Association of Realtors (NAR) last week.

“Affordability pushed up re-sales of U.S. single-family homes and condominium units 7.2 percent in July to a seasonally adjusted annual rate of 5.24 million, the highest level since August 2007,” MarketWatch reported of the NAR data. “Realtors and economists agree that tax incentives and affordability have brought a lot of buyers to the market.

“Still, the inventory of unsold homes remained high, rising 7.3 percent to 4.09 million in July. There was a 9.4-month supply at the July sales pace, matching the prior month’s result,” MarketWatch continued. “The high inventory could hold back a housing recovery, wrote analysts at RDQ Economics in a research note.”

Lawrence Yun, NAR chief economist, said he is encouraged. “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales,” he said.

A report from the U.S. Department of Commerce earlier in the week found that, although new-home construction and permits fell last month, single-family housing starts remained strong, “another sign of stabilization in the housing market,” the Wall Street Journal noted.

Toyota to Conduct its Biggest Recall in China
Toyota Motor Co. last week announced its largest-ever recall in China, affecting more than 688,000 vehicles, due to a defect in the electric window system.

According to the Wall Street Journal, the recall involves four popular models: the Camry, Yaris, Corolla and Vios, produced in China by two joint venture firms between May 2006 and December 2008.

“Analysts say the recall will not have any long-term impact on the Japanese auto maker’s growth prospect in China as the defect is minor and only involves a single supplier,” Reuters says.

“Toyota in recent years has stepped up efforts to reduce quality glitches,” the Journal notes. “In 2006, the company was so jarred by a surge of recalls and quality problems around the world that it decided to delay introductions of some new models by as much as half a year. The move was designed to give engineers more time to work thoroughly on vehicle and component design.”

“Excessive lubricant used in the electronic controls may interfere with the opening and closing of windows or cause short circuits,” Agence France-Presse explains (via IndustryWeek). “No injuries have been reported due to the defect.”