GDP Up: Will Recession Fear Fade as Economy Shows Signs of Life?

GDP numbers, other recent data shows nascent economic improvement.


[Read: Falling Housing Market Inventory Brings Only Limited Benefits.]

Businesses. Although somewhat masked by volatility in the aircraft sector, demand for big-ticket items soared in September, with gains reported in computers, metals, machinery, and electrical equipment. Business capital spending jumped sharply, according to an analysis by Naroff Economic Advisors, indicating that businesses are investing "at a robust pace that bodes well for not just current but future growth."

Consumers. Consumer confidence levels may be in recessionary territory, but that doesn't seem to be translating to spending, at least not to the extent the rock-bottom readings would indicate. Americans have been battered by worry on virtually all sides—from high unemployment, to wealth loss, to high debt burdens, to the likelihood of future tax increases—and yet, last month retail sales rocketed 7.9 percent above September 2010, largely driven by auto sales.

Although economists don't expect consumer spending to be a major driver of economic recovery, relief in the form of stable or even sinking gasoline prices could also take some pressure off Americans' budgets, allowing them to divert funds that would have been spent on fuel to other discretionary items. That could also boost confidence if consumers feel they have more padding in their wallets.

Unemployment. Ask anyone what the most pressing problem for the economy is, and more often than not you'll hear "jobs." The number of unemployed or underemployed has ballooned to 26 million Americans over the past several months, and the ranks continue to grow.

But while there's no denying the employment situation is grim, the economy is adding jobs. Accounting for the return of striking Verizon workers, 58,000 jobs were created in September, after August returned a shocking zero net jobs created. Coupled with initial unemployment insurance claims tapering off, that means the unemployment rate might drop soon.

[Read: America Braces for European Economic Fix.]

For the time being, it seems the United States will muddle along as a fundamental recalibration of the economy works its way through the system. But obviously the United States does not exist in a vacuum. The chronic weakness of the economy makes it vulnerable to shocks. Right now, the euro zone crisis poses the greatest threat the U.S. economy—if European policymakers can act decisively to avoid a financial meltdown, its impact will likely be contained. If not, the likely slowdown in the European economy could be enough to push the United States back into recession.

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