MOSUL, Iraq (Reuters) - Eastern Mosul is coming back to life. In the few weeks since Iraqi forces drove Islamic State from this side of the city, markets have opened and bulldozers have begun to clear the debris left by battle.

An Iraqi boy carries bread at Nabi Yunus market in the city of Mosul, Iraq. Picture taken March 19, 2017. REUTERS/Youssef Boudlal

Stalls spilling onto the street in between collapsed buildings display fruit and vegetables, and vendors play recordings advertising SIM cards and mobile phones -- use of which was punishable by death under Islamic State.

But everywhere are reminders of the pain the city has endured and the irreversible physical and psychological damage caused to Mosul, the Iraqi stronghold of the ultra-violent jihadist group for nearly three years.

Sections of road are closed off because of bomb damage, or because they lead to bridges across the Tigris river to western Mosul, where fighting still rages. There is no mainline electricity or running water, residents say, and dejected laborers sit on the roadside hoping for work or asking for money.

A U.S.-backed offensive, now in its sixth month, looks set to drive Islamic State from the city and end its sway over territory in Iraq. Troops recaptured eastern Mosul in late January and began assaults on the west last month. There, civilian deaths are increasing and physical destruction has been greater.

The dire situation in east Mosul shows that once jihadist rule has ended, the city will likely face a slow recovery at best.

“This war has destroyed everything,” Mohammed Abdullah, a 50-year-old day laborer said, standing with several other men outside a covered central market.

“Every day we look for work but there’s nothing -- maybe one day a week, for which we earn around 10,000 dinars ($8.50). There’s no government aid. All I have left is my citizenship,” he said.

Much manual labor work, organized by the town hall, involves clearing up debris and rubble-littered streets.

Outside the Nabi Yunus shrine, a site important to Muslims, Christians and Jews which Islamic State blew up in 2014, residents of east and west Mosul shoveled detritus onto a tractor-drawn skip.

“Work is very occasional but we’re glad to be out doing it, and free of Daesh (Islamic State),” said 30-year-old Waddah, who asked not to be identified by his last name because he still has relatives living in IS-held areas.

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Displaced from western Mosul by fighting, Waddah had come with 14 other relatives to live at his cousin’s home.

“It’s cramped and there’s no electricity or running water,” he said.

Fighting since the Mosul offensive began in October has displaced up to 355,000 people, according to government estimates. The civilian death toll is unclear but some estimates put it as high as 3,500.

The fighting has also damaged infrastructure including electrical power.

At the market, some shop-owners ran generators to light their stores. Business had somewhat picked up, they said.

PHYSICAL, PSYCHOLOGICAL SCARS

One vendor displayed clothes he said he had not been able to sell under Islamic State, such as full-length trousers rather than ankle-length ones required under the group’s narrow interpretation of Islam.

Goldsmith Moayed Sayegh, 54, said business was back to about 40 percent.

“You can see there’s life in the market now, but the problem is infrastructure and security,” Sayegh said.

“There are still mortar shells being fired across the river by Daesh (Islamic State) and landing in eastern Mosul. Today one hit a school building and a child was killed.”

The physical damage is always visible and residents are still in danger from spillovers of fighting.

But for some, it is the psychological scars that run deepest.

During their rule, Islamic State militants executed the mother of Loay Jassem, now 21, for being an MP.

“They executed so many politicians and police, people who worked for the government,” Jassem said, gathered with friends at a market stall.

The militants shot his mother Ibtisam Jaber in the head in front of his younger sister, who was six at the time, Jassem said.

The boys said they had also seen Islamic State kill a disabled child.

Those still young enough wanted to go back to school, having missed more than two years of education.

Other youngsters were more desperate for money.

A young man standing on the city outskirts watched a private company de-mine a patch of land thought to be booby-trapped by Islamic State as they withdrew.

“Who’s the boss here? I need work,” he said.

Click tmsnrt.rs/2mZWV4j for graphic on Map of Mosul