Economic signs point up, but can clues be trusted?

Is the recession bottoming out? Improvement in several indicators brings hope, but economists hesitate: It may be an aberration, not a trend. The economy could by critical in the November election. One government economist boldly declares the recession is over, but the unofficial umpire for such things, the nonprofit National Bureau of Business Research, of which Harvard University's Martin Feldstein is president, will wait for more evidence. If the recession has really touched bottom, it is one of the shortest in modern times.

Here are some clues to the economic puzzle:

* Housing starts in August rose for the third consecutive month, though economists warned higher interest rates might check the advance.

* The stock market challenged its 3 1/2-year high on the Dow Jones industrial index, which has gained over 200 points since 1978.

* The Federal Reserve Board announced production by the nation's factories, mines, and utilities increased 0.5 percent last month after six straight months of decline. The one-month gain is the largest since May 1979 (1.1 percent). This still leaves the index 7.6 percent under August a year ago.

* Unemployment dropped slightly in August from 7.8 to 7.6 percent.

* The government's "index of leading indicators" showed a 4.6 percent increase in July, a record.

* The Conference Board, a prestigious New York business research organization , said the index of consumer confidence rose in August for the third consecutive month.

* Commerce Department chief economist Courtnay M. Slater declared hopefully that the recession ended in July and recovery began in August, although full recovery, she said, may lag.

Many private economists don't consider these signs conclusive; they are hopeful, but they still aren't sure there is a trend. They debate whether the bottom will be sharp, with a quick v-shaped recovery, or a more gradual u-shape. The one-month jump in national productivity, they say, is a good sign, but somewhat misleading: There is a big lift in production of consumer goods, but auto production is still dropping. Auto assemblies are down 12 percent from July.

Noted economist Paul A. Samuelson says the period of "free fall" in the economy has ended, and that the "parachute of automatic stabilizers" (unemployment insurance, government spending, easier money) has opened.

Leon Taub, vice-president of Chase Econometrics, thinks the latest figures confirm that the economy has hit bottom and may have been moving sideways or even perhaps a bit upward, but that the recovery will not be as fast or big as past recoveries.

The economy could decide the November election, politicians think.

Voters often cast ballots according to their expectations rather than their present experience, politicians say. The question now is: Has an economic recovery really begun and, if so, will it be big enough to alter voter resentment of the President brought about by current hardships?