Economic optimism grows, but risks remain

— -- Nurse Next Door, a Canadian home health care provider, is fielding 100 inquiries a month from prospective franchisees in the USA, up from 20 last spring.

Jacobs Realty Group of Radnor, Pa., has seen two dithering clients lose out on office building purchases to other buyers in the past two weeks — a phenomenon that hadn't occurred in about four years.

And in the past month, six customers of Maykus Custom Homes have signed letters of intent to buy newly built houses in the Fort Worth area. The previous average: one a month — maybe.

Four years after the recession officially began in December 2007, economists, businesses and consumers alike have expressed a growing optimism about the recovery in recent weeks. The more confident, if still tempered, outlook is taking shape as the nation seems to be navigating past some big stumbling blocks — such as high gasoline prices — that have impeded growth most of this year. Some recent encouraging signs:

•Vehicle sales in November rose 14% from a year ago to an annual rate of 13.6 million — their best showing since cash-for-clunker incentives drove purchases in August 2009. Economists cite, in part, the recent easing of auto shipment disruptions that followed the Japanese earthquake early this year, as well as a less diffident consumer.

"We're getting some pent-up demand kicking in where people who have not replaced for a long, long time, particularly if they're still working … are deciding it's time," says Nigel Gault, chief U.S. economist at IHS Global Insight.

•The unemployment rate last month fell 0.4 points to 8.6%, lowest since March 2009. Although the decline was partly due to a 315,000 drop in the labor force as discouraged job seekers simply gave up, employment is up an average 321,000 a month since August, according to the Labor Department's household survey. Most encouraging: Much of the hiring appears to be by small businesses, which typically fuel job growth in a recovery.

•The housing market, though still anemic and weighed down by foreclosures, is showing small signs of life. In October, pending home sales jumped 10.4% from September and permits for new single-family homes were highest since May 2010. Builder sentiment also has edged up the last two months and is at an 18-month high.

"We're finally getting back on course," says Chris Rupkey, chief financial economist for Bank of Tokyo-Mitsubishi.

Worries about Europe

Even so, the recovery remains relatively tepid amid lackluster household income growth and still lacks sufficient momentum to generate enough jobs to significantly lower unemployment next year.

And financial turmoil in Europe could still derail the upswing. Stocks have fallen more than 3% this week after Fitch Ratings and Moody's said an agreement at a European summit last week does little to alleviate the massive debt burdens of some countries.

Many economists consider a European recession almost certain. That would hobble U.S. exports and cut economic growth slightly , but only a meltdown that paralyzes global credit markets would push the U.S. back into recession, Gault says.