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Published: Friday, 3/2/2012

Analysts: U.S. economy could be in upward mode

ASSOCIATED PRESS
A house goes up in Newtown, Pa. Some analysts see the economy building to where growth is great enough to spur more growth.  A house goes up in Newtown, Pa. Some analysts see the economy building to where growth is great enough to spur more growth.
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WASHINGTON -- After years of bad news begetting more bad news, the American economy may finally be building momentum in the other direction.

A flurry of economic reports issued Thursday showed some solid gains: Companies are hiring. Factories and department stores are busier. Americans are buying more cars.

And the stock market just ended its best February in 14 years.

But Thursday's reports also showed that a healthier job market has not translated into bigger paychecks for workers or a surge in consumer spending. And the progress of the past few months is now threatened by a rise in gasoline prices.

Analysts say the economy may be on the verge of a "virtuous cycle," in which stronger hiring fuels more consumer spending, which leads to even more hiring and spending. But months of improvement have yet to demonstrate that the cycle can sustain itself.

"When you get this sort of hodgepodge and not-so-good results, you start to see the true nature of this recovery," said Sean Snaith of the University of Central Florida.

A healthier job market has not produced bigger paychecks or a surge in consumer spending. The housing market is still weak. A European recession threatens to hold back U.S. growth.

Thursday's reports showed an economy maintaining its growth 2 1/2 years after the official end of the Great Recession: The number of people applying for first-time unemployment benefits fell last week to a four-year low. And many retailers, including Target Corp. and Macy's Inc., reported improved sales for February.

At the same time, the government said consumer spending flat-lined in January after adjusting for inflation. Manufacturing activity grew at a slower pace in February as factories received fewer orders and paid more for raw materials. Construction spending slipped in January, the first monthly drop since July. And gas prices appear headed toward $4 a gallon.

All that comes as a strong report this week on consumer confidence helped lift the Dow Jones industrial average past 13,000 for the first time since May, 2008. Unemployment has dropped for five straight months. And the economy has generated nearly 2 million jobs over the past year.

Once a virtuous cycle feeds on itself, optimistic consumers spend more, which motivates businesses to hire more. And so on.

It could happen.



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