The recession is over! The economy is cured and now we can put this all behind us and get back to our lives. Ok, well it might not be all roses, but the third quarter’s 3.5 percent increase in GDP shows that we might be on the right track. While this is inspiring news, there is still skepticism that this growth truly marks the end of the recession. Third quarter profits were inflated thanks to significant government aid through “Cash for Clunkers,” first time homebuyer rebates and other stimulus programs. In total, the government spent 7.9 percent more this quarter than they had during previous one.

Even as the various indexes continue to gain strength on Wall Street, there are mixed results from the third quarter earnings reports of many institutions. Unemployment numbers are still at record levels, and although this tends to be a lacking indicator of the economy, it shows that Americans are still feeling the pain of the recession. There has been some favorable news for job seekers however, as the rate of layoffs have slowed considerably in recent months.

Despite the fact that they were the first ones to go down in the economic crisis, financial institutions—for the most part—appear to be making the quickest comeback as well. Many of the country’s biggest banks, including Morgan Stanley and Wells Fargo, reported better numbers than investors had anticipated during the July-September quarter. Goldman Sachs’ earnings rose 73 percent from their low point of the financial crisis, posting a profit of over $3 billion in the third quarter. JPMorgan Chase enjoyed similar success, exceeding expectations by posting a profit of $3.59 billion.

While this appears to be a resounding success for the industry at large, analysts are worried that the majority of profits came as a result of trading, as opposed to lending.

Despite the positive overall outlook, these banks reported high higher loan losses, which is a sobering reminder that the rebuilding effort is far from over. Other banks suffered similar loan losses, including Bank of America and Citigroup. According to a Citigroup report, the company lost over $8 billion from delinquent loans, which is still an improvement over the second quarter.

“What we wanted to see going forward is organic earnings growth driven by core businesses,” said Tom Higgins, chief economist at Payden & Rygel.

These core businesses—for the banking industry—are defined by their loan operations. In a sampling by Keefe, Bruyette & Woods, roughly half of the banks observed exceeded expectations, while the other half fell short. This sort of discrepancy in earnings is an indication that we are far from reaching stability.

The high credit losses are an indication that businesses and individuals are still having difficulty paying off their bills. One industry that appears to still be behind the eight ball is the airlines. Continental Airlines posted an $18 million third quarter loss, citing a decrease in business travel for the lack of revenue. Manufacturing giant Boeing had to lower its financial projections for the year after suffering a $1.6 billion loss in the third quarter, in large part due to their delays on the production of the 787 Dreamliner.

Retail numbers were better than expected in the third quarter despite wavering consumer confidence. Radioshack was able to post a solid profit and beat the expert’s predictions, and Amazon reported a 68 percent increase in their net income.

Despite a sharp drop in sales from the same period last year, Microsoft was still able to post a net income of $3.57 billion. The company attributes the profit to massive cost cuts and layoffs. In an effort to boost future sales, the company offered many incentives during the third quarter for their recently released Windows 7 operating systems.

Verizon Communications, the second-largest phone company in the country, reported a 30 percent drop in its third quarter earnings compared to the same period last year. Although this still amounted to a $1.18 billion profit, the company is still taking measures to improve performance. In order to make up for their lackluster third quarter numbers, the company is in the midst of laying off more than 8,000 employees and contractors by the end of the year.

While GE had promising gains from its various manufacturing divisions, many of these profits were offset by losses from its GE Capital division. Struggling to overcome losses from real estate and other lending, GE Capital’s profit dropped 87 percent during the third quarter, dragging down GE’s total profits to $2.4 billion.

After experiencing over a year of continuous declines in economic output, positive news will do a lot to restore faith in the economy. The growth in this quarter has been promising, but we are far from out of the woods.

“This welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered,” said Christina Romer, President Barack Obama’s chief economist.

It will be interesting to see what happens in the fourth quarter, which is usually a boon for the retail industry. Early reports say that many shoppers will be cutting back in their holiday shopping, which doesn’t bode well for coming quarter and may indicate that the current optimism will be short-lived.

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