NEWS ANALYSIS : Is Recovery Under Way? Signs Mixed : Economy: Early indicators of growth are appearing only in some parts of the country. The rebound could easily falter and fail.

Out here in the far western suburbs of Chicago, 30-year old Kevin Roberts believes that the first faint signs of economic recovery are in the air. Feeling better about a job that for a time seemed shaky, he has decided to buy a house.

“I was pretty nervous about my company late last year,” says Roberts. “I feel better now. So I’ve got to look for a house for my own financial well-being. And the interest rates nudged me to start.”

Mike O’Donnell, a 35-year-old stagehand in a Chicago theater, is taking the plunge, too. His wife just gave birth to their fourth child. His family needs more room. And he is persuaded that the economic omens are now favorable enough to go for a larger home.

But wait. At the Illinois Department of Employment Security office in nearby Arlington Heights, more than 100 newly unemployed workers show up each day to apply for benefits, three times the numbers before the recession. Harried staff members arrive as early as 5 a.m. to keep up with the paperwork.

“They say in Washington there is a recovery,” says employment office manager Jim Ballee, referring to optimistic remarks recently by President Bush and Alan Greenspan, chairman of the Federal Reserve Board. “Tell Bush and Greenspan to come stand in my office for awhile and see what they think.”

What explains these contradictory readings? Is a recovery truly under way, or is the economy still frozen in place?

The answer, according to a growing number of economists and government officials, is that signs of improvement are in fact appearing in some parts of the country. But the economy’s underlying problems are so great and public confidence so shaken that the recovery could easily falter and fail--just as a similar comeback fizzled a year ago.

Economists say that the ephemeral nature of the recovery reflects the unusual characteristics of this particular recession. More than just a routine cyclical downturn, the slump of 1990-92 has been prolonged--and made more painful--by the convergence of several long-term, structural changes in the economy, from the massive debt accumulation of the roaring ‘80s to the domestic consequences of the Soviet Union’s demise and the continuing crunch of foreign competition.

And just as this recession has been anything but traditional, the recovery is expected to be far different than those of the past, analysts say. Instead of the vigorous, robust growth that followed previous contractions, this one is likely to proceed in fits and starts, causing the economy to expand so sluggishly that it may feel to many like no growth at all.

Even Greenspan, who incorrectly declared a recovery a year ago, concedes that he might be too optimistic today. “We are beginning to see stirrings,” the Fed chief recently told Congress. But, he added: “It could just as easily peter out as, indeed, the much more vigorous recovery of last spring petered out.”

When Greenspan abandoned his cautious, go-slow approach to economic policy and engineered a dramatic, one-percentage-point interest rate cut in December, elated economists predicted that the move would bring on the recovery once and for all by mid-1992 at the latest. Altogether, the Fed has caused short-term interest rates to fall by about four points since the recession began in mid-1990.

Now, more than two months after the December cut, the Fed’s rate cuts are coursing through the nation’s economic system and producing visible results, particularly in interest-rate-sensitive areas such as home buying and mortgage lending. Nationwide, housing starts rose 5.5% in January, largely because of big gains across the Midwest. So far in 1992, sales of new homes in the Chicago area have doubled over the same period last year.

With home sales surging, construction is picking up, too. Mike Wehrmann, 28, was just hired as a superintendent for customer service at a new housing development in Lake in the Woods in January.

“Last year at this time, I was laid off,” says Wehrmann. “But now, I’m in a company that is strong, and we are expanding.”

Ripple effects are showing up in other sectors that react quickly to interest-rate reductions. At Cole Taylor Bank, a mid-sized Chicago-area institution, the surge in home buying, combined with a rush to refinance existing home mortgages, is leading to rising profits. As a result, Cole Taylor is hiring.

“I’ll hire at least a couple more people myself,” says Fred de Rood, who just moved from Alabama to join the bank as a lending manager.

In past recessions, a housing sector upturn has often been the engine that has pulled the entire nation into a recovery. As home buying accelerates, appliance and furniture sales increase, manufacturing employment grows and retail and car sales begin to improve as well.

Chicago retailers, like their counterparts across the nation, saw their sales increase somewhat in February. But many caution that the gains may simply reflect steeper-than-normal price discounting by department stores after the Christmas holiday season.

“We had a lot of clearance items out there, so it is hard to tell what is going on,” says Sue Sorensen, a spokesman for Dayton Hudson, which owns Marshall Fields, Chicago’s premier department store chain.

Auto dealers reported a slight increase in car sales after the Chicago Auto Show in early February. Yet they, too, remain nervous. “There has been an uptick since the auto show, but the question is whether that can be sustained,” says Jerry Cizek, executive vice president of the Chicago Auto Trade Assn.

And so far, the early signs of life in real estate and other interest-sensitive sectors are not being reflected elsewhere in the economy. In fact, in Chicago, a city that many economists say closely mirrors the status of the national economy, the recession still dominates the economic landscape--and still weighs heavily on the consumer psyche.

Major corporations, for example, are stepping up the pace of their job cutbacks, even as the housing and banking sectors are starting to flourish. While employment often is a lagging, rather than a leading, indicator of the economy’s direction, analysts say that it is unusual to see so many fresh layoffs in the early stages of a recovery.

Indeed, a number of familiar, Chicago-based companies--Sears, Spiegel, Inland Steel and Kraft, among others--have announced layoffs since the first of the year. And Caterpillar Tractor, one of the largest employers in northern Illinois and a major U.S. exporter, remains strikebound, depressing regional economic activity.

U.S. Steel recently announced plans to close its legendary South Works mill in April, eliminating 700 jobs. “If they say there are signs of recovery, I think they are lying to me,” says Granderson Payton, who was laid off last month after 27 years as a South Works crane operator.

Such widespread, continuing job losses are acting as a drag on the economic flywheel at the same time that the Fed’s rate cuts are beginning to have an effect. And in contrast to past recessions, which have struck primarily at blue-collar wage workers, the current slump has cut a wide swath through the ranks of white-collar managers and executives.

“We had been laying people off for the last six or seven months . . . and they finally got to me three weeks ago,” says Jeff Bowman, a laid-off security firm manager standing in line to receive benefits at the Arlington Heights employment office.

Joblessness, of course, has had a major impact on consumer spending. Many of those who have gone back to work after extended periods of unemployment are now so exhausted, both emotionally and financially, that few plan to spend much money any time soon.

Shannon Jackson, 25, was laid off twice during the current recession--once by a construction industry consulting firm and a second time by now-defunct Midway Airlines--before she was hired to help staff a new Sheraton hotel in downtown Chicago. She had to stand in a line of 9,000 anxious job seekers for seven hours during a January blizzard to get the job.

“I’ve depleted my savings completely,” says Jackson. “I can’t do anything until I pay off the credit card bills I built up while I was out of work.”

Faced with such powerful evidence that the economy is still enduring real pain, most economists believe that it is far too early to declare the recession over and a traditional economic recovery under way.

Even senior Bush Administration policy-makers, under intense election-year pressure because of the recession, disagree publicly over whether the recovery is in sight.

“I see robins on the lawn of the economy,” an optimistic Treasury Secretary Nicholas F. Brady recently testified. “I think by the spring, people will start to feel a recovery.”

But the White House’s chief economist, Michael J. Boskin, is far more cautious. “It’s premature to say things are improving,” Boskin says. “There are some sectors and regions that are still flat or are actually declining, like Southern California. It will take several months of broader improvement to change my view that the economy is sluggish, flat and slow.”

Most economists are cautiously predicting that the Fed’s low interest rates will translate into a recovery, even if the White House and Congress fail to agree on a package of anti-recessionary tax cuts.

But the upturn is likely to be anemic. A new survey of 50 leading economists by the Blue Chip Economic Indicators newsletter found a consensus that the economy will grow by 1.6% in 1992. In previous economic cycles, the nation’s output of goods and services has grown by an average of 6% during the first year of a recovery.

Even modest optimism is based in part on faith in the power of the Federal Reserve’s interest-rate cuts. Economists say that it typically takes six months for the full effect of Fed rate reductions to be felt. For that reason, many believe that the December rate cut will lead to a recovery by midyear.

For the time being, though, economists are hedging their bets.