It appears that the U.S. economy may finally be dragging itself out of the economic doldrums. At least, that is what the third-quarter Gross Domestic Product indicates. The GDP showed that the U.S. economy grew at a 3.5% annual pace in the third quarter, snapping a four-quarter contraction streak.

The growth is attributed to the massive government stimulus, which led to higher consumer spending. In addition, a reduction in inventories and robust government spending helped spur growth in the third quarter. But even excluding the influence of auto sales, production and inventories, the economy grew 1.9 percent last quarter.

Some of the jobs that have disappeared through this recession are gone forever, it seems. Even when the market turns, and even gains momentum, we could be stuck with a fairly weak employment market for a while. The recovery will take longer than we'd like, putting more distance between now and the top of the next market run. We've lost 7.2 million jobs since December 2007, and the predictions of some economists that we'll get them back by 2014 may actually seem optimistic.

Unemployment is at 9.8%, and it's expected to clear 10% early next year. Then, we have the specter of a jobless recovery with which to contend. "Full employment" is often considered to be an unemployment rate of 4% to 5%, but it could be a while before we get there. The last downturn, following the dotcom bust, resulted in a peak unemployment rate of 6.3% in 2003 ... and we're already well past that.

Why is the recovery going to be such a grind? Check out the four major reasons after the jump.

There are two opposing schools of thought on the current economic condition. One the one side are those who for see a "double dip" recession with the downturn continuing into next year. On the other side we have another group who see economic growth picking up rather than slacking off next year.

The Economic Cycle Research Institute has developed an index that "predicts" future growth (RPT-ECRI). The index is predicting record growth rate shooting to a hitting a record high. Its weekly leading index rose to 128.3 from 127.1 the prior week.

The Commerce Department released GDP numbers today for the second quarter, and showed that the economy shrank less than expected for the April - June period.

According to today's report, second quarter GDP figures dropped by 0.7%. Before the report, analysts had been expecting to see that GDP actually dropped by 1.1%, providing some fresh evidence that the economy will probably start growing again during the second half of the year.

It appears that a majority of economists believe that the current recession in the United States is going to end this year. The National Association for Business Economics (NABE) will release today a survey that reflects this belief and is in line with a forecast from Fed Chairman Ben Bernanke and others.

According to the survey, 74% of the forecasters believe the recession will end in the third quarter, with 19% pegging the fourth quarter as the final quarter for the recession. The remaining 7% believe the first quarter of 2010 will be the recession's swan song.

Congressional Democrats, including Sen. Robert Byrd, D-W.Va, are pushing for the enactment of a second economic stimulus bill worth $24 billion, including a $6 billion lifeline for the beleaguered auto industry. Odds of it passing in a presidential election year are slim to none.

Democrats, though, are giving the people what they want. Regardless of whether it's a good idea or not, it's fantastic politics. Democrats can prove to voters, who are fed up with the lousy economy, that they "feel their pain," leaving aside the debate of whether it's needed.

That explains why House Speaker Nancy Pelosi, D-Calif., says that the second stimulus bill will need to have bipartisan support -- as the first one got -- because it is vital for the economy. Like the first economic stimulus plan, Byrd's bill will be temporary, targeted and provide disaster relief, according to CQ Politics.com.

"The Speaker earlier had vowed to enact a second measure, totaling at least $50 billion, before Congress leaves this year," the website says. "But the president and congressional Republicans have been less enthusiastic about the idea, repeatedly arguing that lawmakers should wait to assess the impact of the tax rebates and other incentives enacted in February."

The New York Times reports that the European Central Bank raised its equivalent of the Fed Funds rate to 4.25%. Meanwhile, Bernanke's economic wrecking crew has kept the U.S. rate at 2%. Investors will sell dollars and buy Euros. That will cause the dollar to lose even more of the 72% it's lost since January 2001. But none of this is really happening because AFP reports that President George Bush has declared that "we're strong dollar people."

The key to U.S. policy is repeated denials of the obvious -- which is that U.S. policy is consistently intended to weaken the dollar. The reason is that a weak dollar makes the goods of big U.S. corporate exporters relatively cheap when they sell overseas. And of course, since oil is traded in dollars, a weak one causes the price of oil to spike. It now resides at a comfortable $146 a barrel, up 508% since January 2001.

But Reuters reports that Treasury Secretary Hank Paulson -- who last year brought us "subprime is contained" -- now says that the weak dollar is not to blame for high oil prices. With apologies to the old E.F. Hutton advertisements -- which said "When E.F. Hutton talks, people listen" -- when Hank Paulson talks, people snicker.

Economic forecasters and analysts are beginning to give in to recession language, with 51% of respondents to a poll conducted by the National Association for Business Economics (NABE) indicating they believe that a stalled economy is where we may be headed. An Associated Press report indicates that 70% of all survey respondents feel the economy shall grow 3% or less in the first half of this year. A whopping 30% of respondents indicated they feel the economy shall actually contract.

Associated Press stated, "The majority of forecasters polled -- 51 percent -- thought the economic growth during the first half of this year would clock in between zero and 1 percent, which would still mark a feeble showing. Sixteen percent pegged growth in the first half at between 1 and 2 percent, while only three percent put it at between 2 and 3 percent."

The question is whether or not consumers and their discretionary incomes shall tip the economic balance into classically defined recession. While inflation has a greater portion of personal incomes being utilized for the necessities of life, these days it's generally the optional "extras" that stimulate economic growth numbers. Recreational electronics, home entertainment devices, and items of fad and fashion make up the bulk of growth industries today. To what extent will they bear up and in what measure will they support domestic economy?

Your guess is as good as mine...

Gary Sattler is a freelance blogger and former sole proprietor of a thriving retail establishment.

With all the hysteria about global warming and the impact that it will have on the globe, I found it quite funny that the National Oceanic and Atmospheric Administration (NOAA) reported yesterday that we just experienced the coldest winter since 2001. Hey Al Gore -- how can that be? I remember when I was growing up, in the mid- 1970's, Newsweek magazine had a cover story about the beginning of the ice age. Amazing what can happen in 25 years. We can go from an ice age, to global warming. Not bad.

According to the NOAA report:

"In the contiguous United States, the average winter temperature was 33.2°F (0.6°C), which was 0.2°F (0.1°C) above the 20th century average – yet still ranks as the coolest since 2001. It was the 54th coolest winter since national records began in 1895. "

Why not ask the Chinese about global warming? They just experience a horribly snowy winter which has been a major cause of inflation. Extreme cold temperatures were the norm this winter. Over the last 150 years or so the global mean temperature has increased by 0.7 degrees Celsius. This small amount of warming is not unusual, and falls well within the range of variation for both warming a cooling.

In a stat that most likely will surprise few economists, credit card delinquencies are increasing in the U.S. -- a sign that the housing sector slump that has displaced thousands of employees is beginning to exact a toll on revolving credit accounts, The Wall Street Journal (subscription required) reported Friday.

The number of credit card accounts at least 60 days delinquent or that had gone into default increased to 7.6% in December 2007, up from 6.4% in December 2006, according to research compiled by RiskMetrics Group, the Journal reported. Further, Americans had $944 billion in total revolving debt in December 2007, which amounts to a seasonally adjusted annual increase of 2.7%, well below the seasonally adjusted growth rates of 13.7% and 11.1% for November 2007 and October 2007, respectively.

Another bubble: credit cards

Economist Glen Langan told BloggingStocks Friday the credit card sector, like the housing sector, is correcting from an unprecedented -- and unsustainable -- growth period.

After a positive morning for the market, comments from the Federal Reserve regarding inflation have brought out the bears and pushed the indexes down into the red.

When the Fed was busy cutting rates by a total of 1.25% last month, the message it was sending to the market was that inflation was under control, and the Fed was more concerned with growth and less concerned with inflation. Stating that inflation concerns had eased enough to warrant steep rate cuts, the Fed acted twice during January. The first cut came in the form of an emergency 75 basis point cut, and then the following week the market was given an addition cut of 50 basis points.

Today, Federal Reserve Bank of Philadelphia President Charles Plosser, has stoked inflation fears once again by stating that inflation was still on the Fed's minds. Plosser, speaking to the Rotary Club of Birmingham, Alabama, stated that he believes core inflation will remain above 2% through the year, which could prevent further rate cuts in the future.

Consumer prices rose 0.8% in November 2007, above the 0.6% consensus, led by higher gasoline prices, the U.S. Labor Department announced Friday.

Core CPI inflation, which excludes food and energy, rose 0.3%, slightly above the 0.2% consensus estimate, the Labor Department said.

The Consumer Price Index has now risen 4.3% in the past 12 months, a pace considerably above the U.S. Federal Reserve's tolerance zone or 'acceptable inflation rate.' The core CPI has risen 2.3% in the past 12 months.

"Clearly, it's not a good number," economist Steve Affinito told BloggingStocks Friday. "Some were hoping that the energy rise would not hit the CPI as hard, but it did. It suggests that inflation is accelerating, driven mostly by energy costs. Look for stores and businesses to start defending their margins by upping their prices, and this will not make the Fed's job any easier."

During November 2007 energy prices increased 5.7%. Gasoline prices surged 9.3%, and have increased more than 37% in 2007. Apparel prices rose 0.8% and medical care rose 0.4%.

Economic Analysis: The report is more bad news for the consumers, the U.S. economy, and the U.S. Federal Reserve. It reveals a price list that's beginning to feel the sting of persistent, elevated energy prices, as they work their way through the economy. Inflationary pressures are increasing, which will make it harder for the Fed to lower interest rates further to stimulate the U.S. economy. On the one hand, additional monetary policy easing may be needed to stimulate growth. On the other hand, the Fed must be careful regarding the amount of additional stimulus it applies, as it could propel even larger price increases at the consumer level.

Further, the move is the largest coordinated international monetary policy action taken since the world's major central banks provided liquidity to ensure proper market function following the September 11, 2001, terrorist attack on the United States.

The Fed announced Wednesday that it would inject up to $40 billion in reserves into money markets via a new, temporary program called a "term-auction facility." The emergency funds would be made available to banks next week via auction process -- $20 billion each -- on December 17 and December 20. The Fed also said it is setting up lines of credit with the European Central Bank and the Swiss Central Bank that could be used for additional resources.

The plan makes sense, at least on paper. GE (NYSE: GE) believes that it can offset any slowdown in its US business by the acceleration of revenue in China and India. It is, perhaps, one of the benefits of being a multinational.

The FT writes that, "GE's chairman and chief executive (Jeffrey Immelt) said the company's sales in emerging markets such as China and India were expanding at 20 percent a year, and there were few signs of this growth slowing."

But, GE's view is based on two assumptions that may not be true. The first is that a slowdown in the US will not spread to Asia and the Indian subcontinent. Much of the export income from China and India depends on demand in the US and Europe. if that demand slackens, there is no guarantee that their own economies will be able to continue growing rapidly.

GE is also assuming that growth in these countries, particularly China, will not come without a cost. Trade tensions between the US and the world's most populous country still exist. The China toy debacle demonstrates that. It would not take so terribly much for China to shut its markets to certain US goods and services, if it feels that it has been provoked.

GE's plan to keep growing outside the US looks good, for now.

Douglas A. McIntyre is an editor at 247wall st.com.

It seems some people are breathing a sigh of relief this morning following the news that the U.S. economy grew 3.4% in the second-quarter, more than the 3.2% forecast by economists polled by Briefing.com and Bloomberg. This growth pace is the most the economy had experienced in more than a year, and it follows a weak 0.6% growth in the first quarter. This is the advanced GDP number for Q2 and will be revised later. Twice.

The reason for this better-than-expected performance? Rising exports (which should surprise no one given the weak dollar), commercial construction (due to a strong manufacturing sector) and government spending. It was consumer spending, however, the sector which had kept the expansion going in previous quarters, that was weak in the last quarter.