Fears of Slowdown Fade as Economy Shows Some Muscle

Even Nobel economist Paul Krugman, who has pushed for years for more aggressive policies to spur growth, let a notable ray of light into his latest New York Times column, coupled as it was with a reminder that the economy remained depressed.

"It's not hard to see how this recovery could become self-sustaining," he wrote.

Employers added 243,000 new jobs in January, the most in nine months, and the jobless rate dropped to a three-year low of 8.3 percent.

In manufacturing, activity picked up for a third straight month in January with a growing backlog of orders suggesting the strength would be maintained.

A similar picture emerged from the economy's vast services sector, which enjoyed its strongest month in nearly a year.

"The downside risks are evaporating and we are seeing some upside risks to growth," said Harm Bandholz, chief U.S. economist at Unicredit Research in New York.

RECESSION FEARS FADE

Last summer, an already weak economy took a blow from Europe's sovereign debt crisis and an ugly fight in Washington over budget policy that cost the nation its AAA credit rating.

Business and consumer confidence plummeted, stock markets sank and economists began to warn of recession.