The State of the Economy Is ... Fragile

Jan. 28 -- The America that President Bush addresses tonight is economically weaker than it was one year ago.

In the months following the Sept. 11 attacks, the administration, as well as economists from both sides of the political fence, favored the phrase "remarkably resilient" when describing the U.S. economy.

There was plenty of evidence to support that. The United States had been in a recession from January through September of 2001, but thanks to a strong surge of home refinancing and auto sales, the economy began to grow again in the final months of that year.

So a year ago, economic growth was strong, with the gross domestic product at 5 percent. But then after moderate growth in the middle of the year, the economy hit what the Federal Reserve has described as a "soft spot."

We'll find out just how little the economy grew in the final three months of 2002 this Thursday, when the Commerce Department releases data on the fourth-quarter gross domestic product. Economists have been revising down their forecasts and now believe the economy grew as little as 0.6 percent — not a strong showing by any measure.

How Now Dow?

The last time President Bush gave his State of the Union, the benchmark Dow Jones Industrial Average was at 9,840. Today, despite pushing into the 10,000 range in the spring, the Dow hovers around 8,000 as investors remain preoccupied with talk of an imminent war and by lowered guidance from corporations.

In 2002, the Dow was down for a third year in a row, the longest losing streak since 1939-1941. Stock equity funds had their first negative year since 1988, with more than $10 billion coming out of the funds than going in to them, according to Denver-based mutual fund information provider Lipper.

This year started with a bang, as the Dow racked up more than 500 points. But that gain was wiped out as the talk of war intensified and the deadline neared for the report by U.N. weapons inspectors. The Dow has now lost 10 percent in the past two weeks.