False Recovery 2.0: It's Beginning to Look a Lot Like 2011

The US economy is billions of dollars and 1.7 million jobs stronger than we were twelve months ago. But the same headwinds that doomed last year's recovery are swirling again.

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Let's play "Name That Year of the Recovery." In the first quarter of this Mystery Year, the economy adds more than 200,000 jobs in consecutive months. Manufacturing is roaring. Investors are giddy and stocks improve for the third month in a row. The Dow breaks 12,000 for the first time since 2008. Economists are screaming, "Recovery Winter!"

Surprise! It's 2011. The economy accelerated around the '10-'11 bend with practically every conceivable tailwind: accelerating employment, strong industrial production, and a decent, if spotty, normalization in housing.

But you all remember what came after. Unrest in the Middle East sent oil over $100 a barrel. Europe's crisis weighed on banks, confidence, and exports. A showdown over the debt ceiling made a mockery of Washington. By the summer, the boomlet has wilted, job creation has slowed to a pathetic trickle, and economists were talking seriously about a double-dip recession.

Fast-forward to 2012. The economy has added more than 200,000 jobs in consecutive months. Manufacturing is roaring. Investors are giddy. Stocks have hit 2008 highs. Economists are screaming, "Recovery Winter!"

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But here they are, the same old threats. Oil is breaking $100 a barrel again, with Iran halting exports to European countries. Europe is practically in a continental recession, anchored by a full-fledged depression in Greece. And some budget analysts are worrying that we might hit the debt ceiling a few months early, which would mean a redux of the great debt-ceiling space opera of 2011.

The payroll tax cut package signed last week isn't fully paid for. We're now scheduled to hit the debt ceiling in January rather than early spring, according to the Bipartisan Policy Center. Treasury Secretary Timothy Geithner has said we won't hit the ceiling until "significantly after the end of the fiscal year," but oil shocks and a growth slowdown could reduce tax revenues and move the debt-ceiling deadline into 2012, The Hill reported.

There are all sorts of reasons to be confident that this isn't a replay of 2011. We're one year of growth -- and 1.7 million jobs -- stronger than we were in February '11, and this recovery is even broader. If we close in on the debt ceiling in September, Treasury can seek out wiggle room to keep us from touching the ceiling until after the election. Europe's recession is much more likely than an Israeli strike on Iran, and a weak Europe should keep a lid on oil prices.

But the United States is still a recovering patient in a world that's ready to fall apart, like somebody re-learning to walk on a sheet of thin ice. The economy is looking good from the home-front. But remember the last time we looked so good, the ice broke beneath us.