Is the U.S. economy poised for a comeback in 2011?

Many experts believe that after two years of anemic growth a serious recovery is imminent. Why are they so optimistic?

Experts say this year's boost in holiday sales is expected to be the biggest year-to-year increase since 2006.
(Image credit: Getty)

Heading into the new year, more economists are predicting an upswing for the struggling U.S. economy, says The New York Times. After slower-than-anticipated growth in 2010, a number of encouraging trends are driving "new optimism that the recovery will gain substantial momentum in 2011," putting the country "on its soundest footing since the financial crisis started an economic tailspin three years ago." What, exactly, is behind the rosy outlook? Here are five reasons for optimism:

Fewer job cuts

Economic reports released on Thursday revealed that "employers are laying off fewer workers," and that the number of jobless claims has been dropping steadily over the past few months. Weekly unemployment applications, which peaked at 651,000 during the height of the recession in March 2009, have now fallen to 425,000, and the four-week average is at its lowest in two years — all data that has "encouraged economists." The numbers "confirm" that the economy is improving," though layoffs would need to fall further to actually bring down the unemployment rate.

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Obama's payroll tax cut

As part of a compromise to continue the Bush-era tax cuts, Republicans agreed to a 13-month extension of unemployment benefits, as well as a "one-year $120 billion payroll tax cut" that could work as a "back-door stimulus," by letting workers take home more money. Wall Street analysts have forecast more economic growth as a result of the policy, and the Congressional Budget Office, Washington's "official oracle of spending policy," says that "reducing employees' payroll taxes is one of the most effective ways to create jobs."

Stock-market gains

On Thursday, the Dow Jones Industrial Average closed at 11,559.49 — its highest level since August 2008. Broader stock indexes followed suit, with the S&P 500 reaching its highest point since September 2008 and the Nasdaq revisiting a peak last seen about three years ago. All together, these numbers were "seen as confirming the recent trend of a slow-but-steady economic recovery," according to Brian Gendrau, a market analyst quoted in The Wall Street Journal.

A rebound in holiday shopping

Consumers are spending more, as illustrated by a frenzy of last-minute Christmas shopping. Such sales are expected to be robust, rounding out "a surprisingly successful holiday season for retailers," says The Associated Press. With e-commerce leading the way — Mastercard reports that "$36.4 billion has been spent online, a 15.4 percent increase over last year" — overall holiday sales are expected to tick up 3.3 percent over 2009. That would be "the biggest year-over-year increase since 2006, and the largest total since sales hit a record $452.8 billion in 2007."

Rising consumer confidence

Thursday's economic report also showed that consumer confidence had risen to its best level since June, thanks to "improved job prospects and larger discounts from retailers." Overall, recent economic news has been "more favorable than at any time during the past six years," says Richard Curtin, the director of the consumer survey.

Sources: New York Times, Wall Street Journal, Associated Press, Reuters, Atlantic

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