Good news, bad news for economy

WASHINGTON — The U.S. economy is a study in contrasts.

The housing, banking and auto industries are surging back to health and that has helped push the stock market to a five-year peak. Higher prices for homes and stocks tend to make people feel wealthier and spend more.

Yet unemployment remains high and hiring modest. The end of a Social Security tax cut is shrinking already flat pay. Federal budget fights have put businesses and consumers on edge.

Balanced between those tailwinds and headwinds, the economy is struggling to accelerate. By the end of this year, though, many analysts think the tailwinds will succeed in boosting growth and fueling a more robust economy in 2014.

There is some underlying momentum, says Paul Edelstein, U.S. economist at IHS Global Insight. It's not as strong as we would like, but it's there and it's building.

The nation has finally worked off the excesses of the housing bubble.

Home prices rose 7.4 percent in the 12 months that ended in November, according to CoreLogic. It was the largest 12-month gain in six years.

Housing starts will reach 970,000 this year, according to Patrick Newport, an economist at IHS, a 24 percent jump from 2012.

Construction companies will add 140,000 jobs this year, Newport forecasts, up from a scant 18,000 last year.

Struggling consumers put off car purchases for years. Sales reached a 5-year high of 14.5 million last year. Analysts expect sales to reach 15.5 million this year.

Mortgage and auto loans are rising. Commercial and industrial loans rose 2.2 percent in the July-September quarter from the same period a year earlier. Bank profits reached their highest level in six years that same quarter, according to the Federal Deposit Insurance Corp.

The Standard and Poor's 500 stock index has more than doubled from its low in 2009 and is just 4 percent shy of its record high set in 2007.

The heaviest millstone weighing down the economy is the rift between President Barack Obama and Republicans over taxes and spending.

Job gains have held steady for the past two years at about 150,000 a month. That's only about enough to slowly reduce the unemployment rate, now at 7.8 percent.

For now, high unemployment is limiting pay. When employers have lots of job applicants to choose from, they have little incentive to give raises.

Hourly wages rose just 2.1 percent last year.