Fears of Slowdown Fade as Economy Shows Some Muscle

In manufacturing, activity picked up for a third straight month in January with a growing backlog of orders suggesting the strength would be maintained.

A few months ago economists were all but certain the U.S. economy would slow sharply at the start of this year, with many warning that recession risks were growing. That pessimism has been shaken off by a string of surprisingly solid data that paint a picture of an economy with building momentum.

The jobs market is picking up, manufacturing is accelerating and the service sector is also flexing its muscle - good news for President Barack Obama, who faces an election battle in November.

“We were among those people that had been expecting growth to slow. It now seems a lot less likely,” said Jeremy Lawson, an economist at BNP Paribas in New York.

The main reason for this newfound optimism is rising employment, which should help support the consumer spending that drives two-thirds of U.S. economic activity.

Employers added 243,000 new jobs in January, the most in nine months, and the jobless rate dropped to a three-year low of 8.3 percent. A similar picture emerged from the economy's vast services sector, which enjoyed its strongest month in nearly a year.

“The downside risks are evaporating and we are seeing some upside risks to growth,” said Harm Bandholz, chief U.S. economist at Unicredit Research in New York.

– Courtesy of Reuters