Recovery Gathers Steam

For Immediate Release:

December 2, 2010

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By Conor Dougherty and Justin Lahart
Wall Street Journal

The U.S. economy is starting to fire on more cylinders, though the upturn remains too weak to bring down high unemployment.

Several reports Wednesday showed the recovery gaining muscle, including a measure of payrolls showing that private employers added many more jobs in November than in previous months and a report on manufacturing saying the factory sector had notched its 16th straight month of growth.
A Federal Reserve survey of regional economies, meanwhile, concluded that "the economy continued to improve, on balance" from early October to mid-November.

To be sure, the economy faces serious challenges, including a limping housing market, potential spillover from Europe's financial woes, and stubbornly high unemployment, which sits at 9.6%. But the improvement in many key measures suggests the recovery is moving beyond temporary factors, such as government stimulus spending, and is now growing on the strength of underlying demand for more goods and services.

Markets were cheered by the reports on the U.S. economy, along with strong reports on manufacturing from China and other foreign markets. The Dow Jones Industrial Average vaulted higher by 249.76 points, or 2.27%, to 11255.78, its largest gain since Sept. 1 and its sixth biggest one-day jump this year.

Goldman Sachs, whose forecasters have been among the most downbeat about the strength of the recovery, said in a note to investors Wednesday that prospects for U.S. growth had "brightened significantly in recent weeks." The bank revised its 2011 growth forecast for gross domestic product to 2.7%, from 2.0%.

"Demand is not back to 2006 levels, but it's significantly higher than it was when we talked about the 'new normal,'" a term many economists used to refer to the depressed demand levels during the recession, said Norbert Ore, chairman of the manufacturing business survey compiled by the Institute for Supply Management, a group of purchasing managers.

The ISM's manufacturing index, released Wednesday, was at 56.6 in November, down slightly from 56.9 the month before but still the second-strongest reading of the past six months. Any number above 50 indicates expansion.

A Federal Reserve survey of regional economies, meanwhile, concluded that "the economy continued to improve, on balance" from early October to mid-November.

To be sure, the economy faces serious challenges, including a limping housing market, potential spillover from Europe's financial woes, and stubbornly high unemployment, which sits at 9.6%. But the improvement in many key measures suggests the recovery is moving beyond temporary factors, such as government stimulus spending, and is now growing on the strength of underlying demand for more goods and services.

Markets were cheered by the reports on the U.S. economy, along with strong reports on manufacturing from China and other foreign markets. The Dow Jones Industrial Average vaulted higher by 249.76 points, or 2.27%, to 11255.78, its largest gain since Sept. 1 and its sixth biggest one-day jump this year.

Goldman Sachs, whose forecasters have been among the most downbeat about the strength of the recovery, said in a note to investors Wednesday that prospects for U.S. growth had "brightened significantly in recent weeks." The bank revised its 2011 growth forecast for gross domestic product to 2.7%, from 2.0%.

"Demand is not back to 2006 levels, but it's significantly higher than it was when we talked about the 'new normal,'" a term many economists used to refer to the depressed demand levels during the recession, said Norbert Ore, chairman of the manufacturing business survey compiled by the Institute for Supply Management, a group of purchasing managers.

The ISM's manufacturing index, released Wednesday, was at 56.6 in November, down slightly from 56.9 the month before but still the second-strongest reading of the past six months. Any number above 50 indicates expansion.

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