If you want a metaphor for the state of the US economy, and the bubble of denial that some of its policymakers remain within, then look no further than the King Canute-style advertising campaign by car maker Chrysler.

While the average price of petrol is now $4 a gallon nationwide, Chrysler wants the good times to keep rolling. Buy one of its Dodge Durango SUVs - which boasts 13 miles to the gallon around town - or Jeep Grand Cherokees and it will guarantee that you can fill it up with gas for $2.99 a gallon for the next three years - no matter how high the price of petrol rises. (And no matter that it's still a bad deal when compared with a more fuel-efficient car.)

Since some forecasts are predicting $6 for a gallon of gas, that's a scheme that could ruin Chrysler (so it's a good thing for Chrysler the campaign hasn't worked). But how else can it shift its unsold pile of fuel-guzzlers? The alternative is to do what GM did last week: announce the closure of two of its US factories that make pick-up trucks and SUVs, and two more in Mexico and Canada, cutting 10,000 jobs.

The news from GM came in a week when official figures showed a steep rise in US unemployment, the latest round of bad news for the US labour market. That raised the inevitable question about the US economy being in recession, spooked the financial markets and set off another decline in the dollar (which has now been declining and falling for longer that the Roman empire - or at least it feels that way).

But will there be a recession? According to Ben Bernanke, the chairman of the Federal Reserve and so the person who should have as good a feel for the national pulse as anyone, "the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so".

Is he right? Optimists will point to figures from the early part of 2008, showing annual growth of a weak but still hardy 0.9%. And it's true that anyone who bet against the US economy in the last decade would have lost money - its resilience and flexibility are extraordinary. That doesn't mean that the US economy is out of the woods: Bernanke's statement on Monday still leaves room for a downturn. A closer look at the figures removes some grounds for optimism and leaves open the possibility of a long and sluggish period of adjustment. It may not be a savage recession, but the rest of 2008 could still be painful for many - which means that Chrysler will have trouble shifting its cars no matter what the price of gas, unless they start making one that runs on water.

Going back to the first quarter GDP figures (there's a phrase to break the ice at parties), the only unmitigated piece of good news was the rise in US exports and a big fall in imports (thanks to a weaker dollar and weak domestic demand, as you'd expect). That was then. Today's US trade data showed a widening deficit in April, thanks again to the rising price of oil, wiping out otherwise rosy export data.

The effect of more expensive oil and other commodities, and the ripples that sends around the US economy, appears to concern Bernanke, who on Monday warned that inflation is a worry. The combination of the two, inflation and low-to-negative growth, doesn't bode well.

But let's look on the bright side. First, the Fed seems to have successfully warded off the sort of financial meltdown that was threatening a few months ago, highlighted by the collapse of Bear Stearns. Second, while the unemployment rate is creeping up it is still only 5.5% - although it is particularly affecting younger workers. Third, Americans are adjusting to more expensive gas by doing the obvious things: buying more fuel efficient cars, driving less and using public transportation more.

Then there's the bad news. Houses continue to stack up waiting for sale, while sales prices are still tumbling (even if the decline has not been as severe as some earlier forecasts). Fixed investment - including housing and capital expenditure - is faltering. A big hangover in consumer debt and harsher lending terms by banks mean that retail spending is not going to be a source of growth for some time. (The number of Americans defaulting on their auto loans, as with their mortgages, is on the rise. Many borrowers have negative equity on their car - and perhaps also their home.) And of course US consumer confidence isn't too hot either.

How far those trends continue into 2008 will determine whether the US will be officially deemed to be in a recession. But it may not matter, other than for newspaper headline writers. None of the economy's weaknesses - especially in housing - are going to disappear anytime soon. If Bernanke is right and inflation is back on the agenda, then the moment for Federal Reserve interest rate cuts - already down to 2% anyway - has passed.

The columnist Paul Krugman recently wondered if the question "Is this a recession?" meant much anymore, given changes to the economy that have smoothed out the peaks and troughs of the traditional business cycle. It's an open question whether a sharp recession would be any worse than a couple of years of sluggish growth. Optimists who believe that neither are on the cards can make a killing by buying a new condo in Florida - there's plenty out there and they're going cheap. And why not pick up a Dodge Durango while you're out there?