The Economy: Is that light at the end of the tunnel or a runaway freight train?

It is hard to tell whether economic optimism is justified these days.  BusinessWeek reports that the US jobs outlook is brightening thanks to gains in manufacturing and mining–thanks mostly to the expansion in gas extraction (fracking, anyone?)

On the other hand, the Wall Street Journal reports that Germany’s economy is in the midst of a significant slowdown (how’s that austerity working?)  This makes things complicated in Europe:

A worse-than-expected recession could make it harder for Ms. Merkel to persuade skeptical lawmakers and voters to support extra German funding for bailouts for struggling euro-zone countries. Germany and the euro zone’s other financially stronger members may soon have to raise their lending commitments for Greece to keep the country from a messy debt default.

Some analysts are characterizing Germany’s situation as a mild slowdown or shallow recession at worst.  The “Free Exchange” blog over at the Economist doesn’t buy that for a minute:

Europe is forcing itself through a significant structural transformation that can’t occur overnight. Meanwhile, recession will make deleveraging that much more difficult for the periphery, and will increase the odds that something breaks.

Even in the face of a growing domestic expansion, it is hard to see how we can avoid being dragged down by the mess in Europe.  Stay tuned.

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