A Jekyll-and-Hyde economy? Nah. Long expansion unlikely to morph into recession

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Fredric March and Robert Louis Stevenson on the set of “Dr Jekyll and Mr Hyde”. (Photo by Sunset Boulevard/Corbis via Getty Images)

Investors can be forgiven if the seeming Jekyll-and-Hyde performance of the U.S. economy has left them flummoxed.

Is the real economy the one that’s produced record job openings and a jumbo-sized 304,000 gain in hiring in January? Or the one showing the biggest drop in retail sales since the end of the last recession almost 10 years ago?

Read: The stunning drop in retail sales has Wall Street’s economists skeptical

Also Read: Retail sales slump endangers Trump goal of 3% GDP growth

Inquiring minds want to know, but don’t expect the answer to come from this week’s holiday-abbreviated batch of updates on manufacturing and home sales .

See: MarketWatch economic calendar

The housing market has been slowing for months because of rising prices and surge in mortgage rates toward the end of 2018. But mortgage rates have since tumbled to the lowest rate in a year, buoyed by last month’s decision the Federal Reserve to stop raising U.S. interest rates. That could give a lift to builders

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 and home buyers in the spring.

Manufacturers, for their part, are still expanding and hiring, but they aren’t growing as fast as they were just a few months ago.

Read: U.S. industrial production falls in January for the first time in eight months

What’s the drag? The festering trade battle with China, a strong dollar

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  that makes U.S. exports more expensive, a weaker global economy and slower auto sales, among other things.

Some economists say manufacturers are unlikely to experience a big upsurge anytime soon, at least until the trade standoff with China is resolved. The next whammy could come from falling oil

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 if drillers scaled back equipment purchases.

Even with all those headwinds, however, Wall Street anticipates an increase in orders for durable goods for December, aided in large part by a big increase in year-end orders for passenger planes. The original report due on Thursday was delayed by the 35-day partial government shutdown.

What Wall Street really wants to see is how orders for durable goods — products meant to last at least three years — fared in January. The Federal Reserve last week said industrial production fell in January for the first time in eight months, another warning sign that points to a slowdown in the U.S. economy.

Whatever the case, the spotty trends in housing and manufacturing aren’t enough to cast a dark shadow over everything else. Especially as long as consumers — the drivers of the U.S. economy — still have their foot on the pedal.

Rapid hiring and the lowest unemployment in several generations, for instance, are boosting wages and making Americans financially better off. So is falling inflation — households are spending a lot less on gas because of lower oil prices

A the same time, the decline in mortgage rates will make homes more affordable.

In other words, the economy is neither Jekyll nor Hyde. The U.S. isn’t surging like it did last spring and summer, but it’s not about to hit the brakes and careen into a recession.

“The economy has slowed significantly, but there’s plenty of reason to also believe the slowdown may be temporary,” said chief economist Chris Low of FTN Financial.

Expect a similar message from the Federal Reserve’s cliff notes on its meeting in January, when the central bank said it would take a hiatus on raising interest rates. Call it an insurance policy against slow growth or recession. The minutes of the meeting come out Wednesday.

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