That corner keeps slipping further into the future. Economists have been heralding a turnaround for six months, largely because key measures like home prices, retail sales, bank losses, and job cuts have been deteriorating more slowly than they used to. But there's a big difference between a slowing rate of decline and actual improvement, and the economy remains in worse shape today than many prognosticators ever foresaw. Back in the spring, for instance, the Federal Reserve predicted that, in the worst possible case, unemployment would average 8.9 percent for 2009. We soared past that level in April, and it's been worse than the Fed's worst case ever since.

By one measure, the government already plays an outsize role in our so-called free-market economy—and it has little to do with the recession. Economist Gary Shilling has calculated that 58 percent of the population is dependent on the government for "major parts of their income" including teachers, soldiers, bureaucrats, and other government employees; welfare and Social Security recipients; government pensioners; public housing beneficiaries; and people who work for government contractors. By 2018, Shilling estimates, an astounding 67 percent of Americans could be dependent on the government for their livelihood. The implications aren't comforting.

As comebacks go, it's an awfully weak one. Annual car sales in 2009 are likely to end up at the lowest level in years, down more than 40 percent from their peak in 2005. The worst months came in the spring, punctuated by the bankruptcy filings of General Motors and Chrysler. The cash-for-clunkers program provided a nice summer boost, but that was followed by a steep dropoff once the giveaway ended and doubts that the subsidies would lead to any net gain at all.

[Slide Show: 15 Cars Fueling the Auto Recovery.]

Like other segments of the retail economy, the restaurant industry has struggled over the past two years as unemployment has soared and consumers have curtailed spending. The National Restaurant Association's performance index shows that the industry has been shrinking for 23 months in a row. High-end bistros have fared the worst, with sales at fancy restaurants like Ruth's Chris (RUTH) and Morton's Steakhouse (MRT) off by 20 percent or more, as corporate customers pare expenses and other diners trade down. Casual- and family-dining places have suffered too, as people eat out less, order more takeout, or cook at home. Even fast-food chains like McDonald's (MCD) and Burger King (BKC) have lost business, despite dollar meals and other deals meant to keep the fryers sizzling.

Ford attributes its better-than-expected performance—its first quarterly profit since 2005—to aggressive cost-cutting, popular new products like the Taurus sedan and Fusion hybrid, a cash-for-clunkers bump, and improvements at its financing arm. But Ford also is a clear beneficiary of the woes at GM and Chrysler, both trying to recover after bankruptcy filings earlier this year. Ford cited a market share gain of 2.2 percentage points compared with 2008, which helped offset a shrinking market. For a mature industry like the car business, that’s a huge gain in a short period of time. And there’s little doubt that many of Ford’s new customers bailed on the other two domestic automakers as they shambled toward bankruptcy and wolfed down billions in taxpayers bailouts.

It might not seem that way. Lender GMAC is lined up for another bailout of $3 billion to $6 billion from the Treasury Department. Federal pay czar Ken Feinberg recently elbowed aside the boards of directors at seven big bailout recipients by dictating the pay of their top executives. Congress is devising new regulations to police Wall Street, rein in risky practices, protect consumers from corporate predators, and get the government more involved in the private sector than it has been in 70 years.

Now we’re enduring frequent mood swings as the economy teases us with recovery, then smacks down our hopes. There was a bout of euphoria when we learned that the economy grew 3.5 percent in the third quarter, the first period in more than a year when GDP didn’t shrink. Growth was greater than expected, even on par with what you’d see in a normal, healthy economy. Yay! Life is good!

But all empires end, and the warning signs of American decline seem to be blinking more consistently. In the latest annual "prosperity index" published by the Legatum Institute, a London-based research firm, the United States ranks as the ninth most prosperous country in the world. That's five notches lower than last year, when America ranked No. 4. The drop might seem inconsequential, especially in the midst of a grueling recession—except that most of the world has endured the same recession, and other countries are bouncing back faster.

The government's "pay czar," Kenneth Feinberg, is coming down hard on the seven firms under his jurisdiction, ordering steep pay cuts for about 175 top executives. The brass at AIG (AIG), Citigroup (C), Bank of America (BAC), GMAC, General Motors, Chrysler, and Chrysler Financial will have to live without the nine-digit paychecks Wall Street's titans have become accustomed to. Some won't even make eight figures. And the majority of their pay will come in the form of stock that can be cashed in only after the companies have met long-term performance targets. Until that happens, the impoverished execs might have to get by on meager salaries that might not even reach $1 million.

Most people with a stake in the U.S. healthcare system agree there are deep problems that must be fixed. As long as somebody else pays for it.

Virtually all of the problems reformers are struggling to solve—relatively poor health outcomes, medical bankruptcies, nearly 50 million uninsured—derive from one überproblem: Healthcare in America costs too much. So as Congress finally gets close to producing actual reform legislation that could become law, just about every interest group with a Washington lobbyist is fighting intensely to make sure it doesn't get stuck with the bill.

[Slide Show: 10 Products That Boomed During the Recession.]

Stocks are up. Jobs are down. So if you're an investor you're enjoying a vibrant recovery and if you're a worker it still feels like a grinding recession.

Since bottoming out in March, the stock market has soared by about 60 percent, one of the most awesome rallies in market history. The Dow Jones Industrial Average cracking 10,000 may not be strategically significant, but it's a psychological breakthrough that's worth cheering after the demoralizing crash that preceded it.

Maybe the pessimists are wrong. Maybe the so-called economic recovery will gather steam and turn out to be robust. Maybe prosperity is about to leap from its hiding place and shout, "Hey! I'm back!"

But planning your future around maybes leaves little margin for error, and it looks as if the Great Recession is morphing into the Great Hangover. Even though economists believe the recession is technically over, the unemployment rate is likely to hover near 10 percent or higher well into 2010. Businesses have slashed costs, but with sales still weak, they're in no mood to start hiring. The Congressional Budget Office predicts that the unemployment rate will stay above average until 2014 at least. Allen Sinai, an economist at Decision Economics, foresees a "difficult, probably crisis situation in the U.S. labor market that goes beyond the recession and any fledgling recovery."

Are all bankers evil? Maybe not. Over the past year, it's become fashionable to trash Wall Street for unbridled greed and the rapacious use of billions in taxpayer bailout funds. Much of the outrage is justified, since Wall Street firms like Bear Stearns, Lehman Brothers (LEHMQ.PK), Merrill Lynch, and Citigroup (C) stoked the flames that nearly torched the entire economy. But there's been rough justice for a few of those firms, now either defunct or de facto wards of the state.

Other firms have filled the void, becoming even more prominent. One of them is JPMorgan Chase (JPM), whose chief executive, Jamie Dimon, has largely escaped the pitchforks aimed at his fellow Wall Street CEOs. Over the course of the financial crisis, JPMorgan Chase remained profitable, a pillar of relative stability in the midst of an earthquake. The bank absorbed the failed Bear Stearns and Washington Mutual, while accepting $25 billion in bailout money that it paid back with interest once the government allowed it to. Through it all, Dimon consulted frequently with officials in Washington, and news reports have even depicted him as President Barack Obama's favorite banker.

General Motors has some genuine good news. The automaker's June 1 bankruptcy filing hasn't been nearly as ruinous as GM executives once feared. New vehicles like the Chevrolet Camaro, Cadillac SRX and Buick LaCrosse are wowing reviewers and drawing buyers. The Chevy Volt, an electric plug-in that could help move the car industry away from gas-powered engines, remains on track for launch late in 2010. Fewer dealers and a streamlined workforce are finally bringing GM's size in line with its customer base.

But unlike its rival Toyota (TM), GM has a long history of exaggerating its virtues and denying its liabilities. Since GM is now a privately owned company, CEO Fritz Henderson's recent briefing on GM's progress offered useful insight into the company now 60 percent-owned by American taxpayers. But there's more to the story. Here are a few important things Henderson didn't mention:

We tend to think of corporate America as a monolithic bloc of mostly middle-aged men with a prescribed set of views. Politically, they're moderate to conservative (though not necessarily represented these days by the angry mob the Republican Party has become). They believe in low taxes, law and order, and whatever else is good for business. The less government the better.

[Slide Show: 10 Retailers Gaining Strength From the Recession.]

These days, Toyota (TM) is looking like one of the most paranoid companies on the planet. It's the world's biggest carmaker but certainly isn't coasting. The global recession has hammered sales and profitability, with Toyota losing $8.4 billion in the fiscal year that ended in March. Sales are likely to be down 18 percent more this year, with a turnaround next year looking modest at best.

Surprise. That economic recovery we keep hearing about seems to be playing hide-and-seek.

Federal Reserve Chairman Ben Bernanke and others have said that, technically speaking, the recession is over. The stock market has been charging forward, with a 58 percent gain between the lows of March and a September peak. But companies keep cutting jobs, with the unemployment rate creeping up to 9.8 percent in September. It would already have hit 10 percent if not for discouraged workers who lost their jobs months ago and have stopped looking for work. Meanwhile, a lot of things could still go wrong, even if we pretend otherwise. Here are some of the misconceptions about the economic recovery:

At the moment, we seem to be in rehab, struggling mightily to break our spending habit. After drifting upward earlier this year, the personal savings rate has dipped from a high of 5.9 percent in May to 3 percent in August. History tells us that a healthy savings rate is somewhere between 6 and 10 percent of income, which is what it was for most of the 1950s, '60s, and '70s. In 1985 the savings rate started a long drift downward, and in 2005 it actually became negative: As a nation, we literally spent more than we earned.