Now that the U.S. economy is growing -- GDP grew at a 3.5% annualized rate in Q3, according to U.S. Commerce Department data, one key question for investors large and small is: Is the U.S. economic expansion sustainable?

Investors can immerse themselves in data on consumer spending, retail sales, new home sales, auto sales, and factory output etc., and all of those provide clues, no question. But if you're time-pressed and you want one metric to gauge the U.S. economy's likely health 6-9 months from now, monitor: monthly non-farm payrolls, as tallied by the U.S. Labor Department. I.E., how many jobs the U.S. economy lost or created in the previous month.

Is it time to rethink the U.S. job creation paradigm? It may very well be.

The Obama administration is said-to-be weighing whether to propose a corporate tax credit for new hires and extending unemployment insurance and Cobra benefits in light the nation's job creation drought, The Wall Street Journal reported(subscription required.)

It's a stat for the era, and probably for the ages: the number of open jobs declined 50% in the past two years, to a seasonally-adjusted 2.4 million in July, Marketwatch.com colleague Rex Nutting reported Wednesday. Read the full government report by clicking here.

Equally sobering, in July there were 6.05 applicants for every job opening. To show you how much the U.S. job market has deteriorated, and how much slack there is in the labor force, in December 2007 there were just 1.72 unemployed people for every job opening.

It looks like tomorrow could very well become yet another 'brace yourself Friday' or another edition of "As The U.S. Economy Turns."

Still, hopefully it won't become another "down goes the Dow" day, although analysts and economists certainly haven't ruled the latter out.

The reason? The July 2009 jobs report, to be released by the U.S. Labor Department Friday at 8:30 a.m. EDT. Economists surveyed by Bloomberg News expect the report to show that the nation lost 300,000 jobs in July, with the unemployment rate rising to 9.7% from 9.5% in June.

Have you wondered why we don't see more job growth under the economic stimulus program? One reason is that states are using half of $8.8 billion dollars to plug budget deficits. In all, the Department of Education is disbursing $56.6 billion to the states with few requirements as to how the money is spent.

Here's a breakdown of some of the projects being funded:

Shortly after President-elect Barack Obama, D-Illinois, is inaugurated as the 44th president of the United States, congressional policymakers are likely to act on the largest fiscal stimulus package in U.S. history, and send the bill to the new president's desk, hopefully before mid-February.

The bulk of the package provides stimulus aimed at generating economic growth -- i.e. an effort to help pull the U.S. economy out of its worst recession since at least the Reagan era recession in 1981-82.

Equation: job growth = earnings growth

Moreover, the likely programs -- infrastructure projects, energy system improvements, business investment tax credits, and aid to the states, among others -- must have as their primary focus GDP growth and the reason is obvious enough. Consumer spending and business investment cutbacks, along with declining asset prices, have reduced demand to such a degree that absent stimulus targeted to increase demand the U.S. economy will remain in recession through 2009 and well into 2010, many economists agree.

Still, what the nation does not want is a fiscal stimulus package that does not call for additional hiring, so says economist Peter Dawson.

Many economists, analysts, traders and others agree it's way too soon to assess the impact of this latest, mortgage-related jolt on the stock and bond markets, and on the U.S. and global economies.

There are too many moving parts, and too many unknowns to form meaningful, enduring conclusions. The reason? The financial world order we see today may not, in fact, be the financial world order we see tomorrow. The Dow was down about 256 points to 11,165 early Monday afternoon.

But there is one conclusion U.S. investors / citizens can form regarding the U.S. economy, so says an economist: expanding credit and rising home prices, in and of themselves, are not engines of economic growth.

Now, everyone's recognizing 'the obvious'

"We have now entered the age of recognizing the obvious," economist Richard Felson said. "Almost everyone knew that the booming housing market would slow down as soon as all potential buyers had been tapped and as the American economy slowed. But few foresaw the impact the slowdown would have on mortgage bonds, their owners, and the financial system. We now have to rebuild the American credit market, and global credit market, as well, to a degree. It will be a major task."

The primary source of all the above, in Felson's interpretation? Structural problems in the U.S. economy, primarily a lack of jobs, or low job growth, he said.

"For the better part of four years, America went blithely along, confident that the fundamentals of the [U.S.] economy were sound. Yet all the while, job growth and its companion, rising median wages, were inadequate. But they were ignored because corporate earnings were up and home values were rising. But it was a building constructed on quicksand," Felson said. "The boom was not sustainable. The [U.S.] economy did not have growth engines in place for sustainable growth. "

Oil declines by $30 from record highs. Other commodity prices moderate. The dollar rallies. The nation records better-than-expected GDP growth in Q2.

All are positive data points that suggest that the U.S. economy, while it's certainly not in the midst of robust growth, has not run totally into a ditch, either.

What do the latest economic data points mean for the Dow Jones Industrial Average, and U.S. stocks, in general, for the next six to nine months? Here's the bullish and bearish cases:

Bullish case: Technical analysts would cite the Dow's close above the 50-day moving average for three consecutive days, the fact that the Dow held support at the 11,000 level, and a series of higher closing highs and higher closing lows in the past two months.

Further, technical analysts would also cite the fact that the Dow has completed the volume-light June-July-August summer season (typically bearish for stocks) during a period of anemic growth (if the U.S. economy isn't already in a recession), without plunging to nerve-wracking lows. True, the Dow fell from about 12,400 in June to 11,000 in July, but technicians would cite the aforementioned positive technicals as an argument that a bottom is in place.

Bearish case: Technical analysts would cite the fact that the Dow, although above the 50-day moving average, nevertheless remains below the 200-day moving average -- the toughest moving average line to break in trading. Also, market 'up days' have lacked sustained buying strength as measured by the MACD Histogram.

Further, and equally important, Dow bears would say that although the Dow has risen from its 11,000 low, the roughly 600-point increase is still well within the range of a correction -- or in this case short-covering -- in a long-term bearish trend. In other words, the Dow's recent rise could be Pyrrhic or false -- a classic example of a 'dead cat bounce.'

Market Analysis: With all due respect to technical analysts and their indicators, the view here argues that investors/ traders should take their cue from the U.S. economy's fundamentals: specifically, corporate profits and job growth. Absent substantial, sustained gains in each, any Dow rally is viewed with skepticism.


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What's your view of the Dow? Is this stock market rally real? Or is it temporary? Let us know what you think.

U.S. consumer confidence declined to 57.2 in May 2008 -- its lowest level in 15 years -- as consumers continued to express concern over record gasoline prices and virtually non-existent job growth, the Conference Board announced Tuesday.

Economists surveyed by Bloomberg News had expected the index to drop to 60.0 in May 2008. Consumer confidence totaled 62.8 in April 2008 and 65.9 in March 2008. In February 2008, the index stood at 76.4.

Also, the board said consumers' evaluation of present-day conditions weakened further in May 2008. Those claiming business conditions are "bad" increased to 30.6% from 26.5%, while those claiming business conditions are "good" declined substantially, to 13.1% from 15.4%.

Meanwhile, consumers' assessment of the job market was considerably more pessimistic than last month. Those saying jobs are "hard to get" rose to 28.0% from 27.9, while those claiming jobs are "plentiful" decreased to 16.3% from 17.1%.

Further, the board said consumers' short-term expectations continued to deteriorate in May 2008. Consumers expecting business conditions to worsen over the next six months increased sharply to 33.6% from 27.4%, while those anticipating business conditions to improve increased slightly, to 10.4% from 10.1%.

Economic Analysis: The May 2008 consumer confidence headline says it all: U.S. consumer confidence is at a 16-year low. The slow growth / no growth U.S. economy understandably is weighing on the typical person's outlook. Stagnant wages for many, record-high energy prices, increasing food prices, uncertain corporate prospects and the worst housing market in a generation, suggest difficult economic circumstances for many Americans, and one would expect concern about the above to show up in polls / consumer surveys. The public (correctly) senses that economic conditions are not good for most individuals and businesses; it will take several months of positive economic data points to reverse this outlook.

U.S. Treasury Secretary Henry Paulson's prediction that the 2008 tax rebate will create 500,000 jobs may come up a tad short, if a Bloomberg News survey is telling.

The median estimate of economists surveyed by Bloomberg News forecasts a stimulus package-induced job increase on 158,500 -- far short of Paulson's forecast, Bloomberg News reported Friday.

Paulson and other Bush Administration officials are hopeful the stimulus package will create jobs both directly and via spin-off effect -- for example, jobs created in manufacturing when goods are purchased; and jobs created in feeder industries to the manufacturing sector, etc.

The administration views the tax cut as intrinsic to jump-starting a U.S. economy slowed to a crawl (or perhaps already in negative growth) by its worst housing recession in more than 15 years, and by record-high oil and gasoline prices. (Oil traded Friday up $2.21 to $133.02 per barrel. Oil is up about 100% in 12 months.)

Economic Analysis: Analysts and economists vary regarding the tax rebate's job creation potential, and the 158.5K Bloomberg survey estimate is most likely on the mark. It's possible the tax rebate could create 500,000 new jobs, but the U.S. economy would have to experience an extraordinary boost in GDP growth in 2H 2008. The more likely scenario: only modest GDP growth in 2H 2008, which will make the Bush Administration the first administration to preside over a net drop in payrolls since the Eisenhower Administration in 1960, according to the Economic Policy Institute.

U.S. consumer confidence is at its lowest level since the Nixon Administration of the 1970s, according to one measure. U.S. consumer confidence fell in March 2008 to 64.5 -- a 35-year low -- the Conference Board announced Tuesday.

Economists surveyed by Bloomberg News had expected the index to drop to 73.0 in March 2008. The February 2008 index was revised to 76.4.

The board said that consumers' evaluation of present-day conditions weakened significantly. Those claiming business conditions are "bad" increased to 25.4% from 21.3%, while those claiming business conditions are "good" declined to 15.4% from 19.1%. Consumers' assessment of the job market was considerably more pessimistic than last month. Those saying jobs are "hard to get" rose to 25.1% from 23.4%, while those claiming jobs are "plentiful" decreased to 18.8% from 21.5%.

The dollar plunged to a new record-low of $1.5463 versus the euro Friday, in a global-wide greenback sell-off, before recovering at mid-day after the U.S. Federal Reserve took two actions to pump more money into the beleaguered U.S. banking system.

After the Fed's announcement, the dollar recovered slightly against the euro to $1.5343, but remained down about one-half cent against the British pound at $2.0144 and down about one-tenth yen to 102.60 yen against the Japanese yen.

U.S. jobs data sparks selling

Prior to the Fed's liquidity-enhancing actions, the currency markets drove the dollar down on speculation that the Fed would again lower benchmark, short-term interest rates by 75 basis points at its policy meeting on March 18 in an attempt to stimulate a U.S. economy that shows increasing signs of contraction. Those recession fears grew in the currency market and in the stock market after the U.S. Labor Department announced Friday that the U.S. economy lost 63,000 jobs in February 2008 -- the nation's largest drop in payrolls since March 2003.

However, the dollar recovered somewhat after the Fed, in a surprise move, took two actions to boost banking system liquidity. The Fed increased by $20 billion total the size of its next two Term Auction Facility auctions, known as TAF, to $100 billion, or $50 billion for each auction, to be held on March 10 and March 24.

Second, in an even-more surprising move, the Fed announced the start of new "28-day repurchase transactions" totaling another $100 billion. Further, the Fed said for the new 28-day loans, banks will be able to post as collateral U.S. Treasuries, agency debt, or agency mortgage-backed securities -- which are eligible as collateral in conventional open market operations.

Initial jobless claims fell to 351,000 to for the week ended March 1 -- below the consensus estimate, the U.S. Labor Department announced Thursday. Claims for the previous week were revised up 21,000 to 375,000.

Analysts surveyed by Bloomberg News had expected this week's initial jobless claims to total 360,000.

Also, the four-week moving average decreased 1,500 to 359,500. Economists view the four-week average as a better indicator of unemployment conditions, as it smooths-out anomalies for strikes, holidays, or other idiosyncratic events.

The largest increases in initial claims for the week ending February 23 were in Massachusetts, +3908, California, +3,022, Connecticut, +1,993, Louisiana, +1,851 and New Jersey, +1.494. The largest decreases were in North Carolina, -1,829, Indiana, -1,296, Pennsylvania, -1,118, Tennessee, -1,090, and Washington state, -981.

Consumer confidence in the economy dropped even lower in February 2008, on concerns that job growth will slow and that the U.S. economy may fall into a recession, RBC Bank announced Friday, in its monthly survey.

The RBC Cash Index dropped to 48.5 in February 2008 from 56.3 in January 2008. The February 2008 stat was the index's lowest reading since the bank started the index in 2002, the bank said.

RBC (NYSE: RY) said the February 2008 reading continues a downward trend that has persisted through the last year, with consumer sentiment fell across the board - - with concerns about the U.S. economies health and worries about job security and investing weighing on Americans.

Economist Glen Langan told BloggingStocks Friday this month's RBC survey is consistent with other polled data on the current economic mood of Americans.

With Wall Street still digesting the latest round of sub-par economic data even as it braces for potentially more, economists and analysts said investors can look forward to one 'certainty' in the weeks ahead -- market volatility, as the financial community gauges the U.S economy's probable economic path for 2008.

Market bears will cite the housing sector's recession, related mortgage and asset-backed defaults, slumping corporate earnings and consumer spending, high energy prices, and uncertain job growth as reasons the Dow and the broader markets are likely to continue to fall in the weeks ahead.

Market bulls will cite solid corporate earnings from companies in international markets, relatively low inflation, a declining trade deficit, the fair or undervalued price of some U.S. equities, and the U.S economy's ability to adapt as reasons the markets may reverse their slide in early 2008 and head higher.