The long-stagnant U.S. labor market is perking up again, and November should register another solid round of job gains. At the same time, Ireland's plight has all but engulfed financial markets, just as Greece did in March, raising the specter of a regional domino-effect that might eventually imperil the U.S. recovery.
Disruptions in bank lending during the second quarter dented U.S. business confidence, leading to a summer lull in investment and hiring that many feared might send the country into a renewed slump.
Such a possibility appears to have been averted for now, but inklings of further trouble are not far from the horizon.
A Reuters poll on Wednesday showed that 34 out of 50 analysts surveyed believe Portugal, where unions held a general strike on Wednesday, will be forced to follow Ireland and seek a bailout.
If that occurred, fears could grow about Spain, which has an economy and debt bigger than Greece, Ireland and Portugal combined, according to Deutsche Bank. Investors might begin to worry about the future of the single currency area set up over 11 years ago and regarded a major success in its first decade of existence.
European Union and IMF help for Ireland will not settle concerns about deeper budget problems for the euro zone as a whole. For investors, an upcoming 750 million euro bill sale for Portugal could prove a major short-term test.
A further worsening of conditions in Europe, in turn, could have major implications for both China, which counts on the continent as a key destination for its exports, and the United States, whose banks have a high exposure to the debt of Europe's major financial institutions.
The European Central Bank will meet this week, but with the growth outlook for the continent mixed, analysts see no appetite for new policy steps. Indeed, talk of an eventual pullback in special liquidity facilities may resurface.
THE REAL THING?
At the very least, the U.S. recovery appears to be on a more solid footing. Weekly claims for jobless benefits have been trending down, sliding sharply to their lowest levels since mid-2008, before the financial crisis intensified.
The Labor Department's monthly tally of employment on Friday is expected to show a gain of 140,000 new positions for November. That's on top of October's surprisingly strong 151,000 increase.
The jobless rate, however, is not expected to budge from around 9.6 percent, where it has been stuck for several months.
"Labor force growth is ... expected to be stronger than normal for a time as many underemployed and discouraged workers start to make their way back," said Aaron Smith, a senior economist at Moody's Analytics in West Chester, Pennsylvania. "Thus net hiring has to pick up substantially before the unemployment rate can fall."
U.S. durable goods data for October contained some potentially troubling signs. New orders for things like televisions, washing machines and refrigerators posted their biggest decline in nearly two years in October and business capital spending plans dropped.
Despite upward revisions to the prior month, the trend suggests consumer spending, which accounts for the better part of U.S. economic activity and has proven surprisingly robust in recent months, could begin to flag.
The same might be said of manufacturing. The Institute for Supply Management's closely-watched index of factory activity, due on Wednesday, is expected to dip to 56.3 from 56.9.
In the spring, Europe's credit market sneeze was a major factor in giving the United States a cold. A broader, drawn out European debt debacle like the one currently unfolding remains a plausible catalyst for an even nastier flu.