I’ve been writing for some time about how the economy is recovering. When I write or speak about this, though, I make a point of noting that I’m talking about aggregate numbers, and that a lot of people out there are still hurting. This is and will always be the case for any economic downturn, but as we move into the recovery, it’s worthwhile to think about it in more detail, looking at the data to see if there are any patterns we can learn from. To the extent that the employment market is not efficient, everyone suffers.

The first step is to identify the groups that have been hit the hardest, and who have been the slowest to recover.

http://www.youtube.com/watch?v=_mx57subjTU

Every year, I struggle with the notion of preparing an outlook—I won’t use the term forecast—for the following year. Every year, I point out, to no avail, that it would be much better to do a forecast for the previous year: better data, much more context, and certainly greater accuracy. I’ve had no more success this year than usual, so I’m preparing my outlook as you read this.

The reason I call it an outlook, rather than a forecast, is that forecast implies a level of certainty that, even in principle, simply isn’t achievable. I used the simile the other day that the Fed’s job is like trying to repair a Seiko watch based on a Timex manual, using a sledgehammer operated by a robot controlled from the next room, in the dark, and I stand by it.

As the new year begins, there’s definitely a change in the atmosphere. Not the 18 inches of snow that my snowblower very efficiently directed right into my face. Not the arctic air of the past couple of days, or even the 50-degree rainstorm of today. (If you live in New England and want the weather to change, wait 10 minutes.)

The change I’m referring to is a definite aura of hope for the economy. Carmen Reinhart and Ken Rogoff—the economists who wrote This Time Is Different, about how financial crises are never different—have come out with a study that suggests the U.S. economic recovery is actually doing pretty well, compared with the experiences of other countries emerging from similar crises.

In the past couple of days, I’ve mentioned that things are improving in the world economy, but we still face risks. One of the best ways to get a handle on these risks is to understand where we came from, what has changed, and what has not.

As part of that, I have been reading or rereading books about the crisis, with a particular focus on those that look at bigger-picture issues rather than the play-by-play. One of the easiest to read in this category, and in many respects the most entertaining, is Boomerang: Travels in the New Third World by Michael Lewis.

Much of the talk recently about economics has focused on how 2014 will be better than 2013. My last post was on exactly that, and I stand by it. When I woke up this morning, however, there were two significant changes that could mitigate some of that positive momentum.

2013 is over. There was a lot of good (have you looked at the stock market?) and a lot of bad (think Washington, DC). There were lots of highs—the stock market again—and lows, such as the EU’s decision to hit Cyprus depositors. Overall, it was a pretty typical year in many respects, although of course we get different highs and lows every year.

2014 will be different. 2013 started with angst and a broken budget; 2014 starts with a smoothly negotiated (if rather minimal) budget deal. 2013 started with worry about fiscal collapse and an exploding deficit; 2014 starts with the deficit projected to decline to below the growth rate of the economy. 2013 started with zero growth; 2014 starts with the most recent quarterly growth figures above 4 percent.

One of the drivers of the current recovery has been the housing market. After prices dropped significantly during the financial crisis, they have since largely recovered (per the chart below). They remain below the previous peaks, but that is not a bad thing.

I was reviewing the posts I made last December, and it occurred to me that many of the problems we were worrying about then have largely been solved, or at least are on their way there. I think we all have short memories and tend to look more at the now than at the recent past, so it’s worth highlighting some of the very real improvements that occurred in 2013.

The biggest relief, of course, was the successful passing of the date for the Mayan apocalypse. No doubt you were all as worried as I was about the impending end of the world, but, ultimately, my decision not to sell everything and head for the hills was vindicated. We are still here.

No, I have not seen the movie yet, although I hope to this week. I have, however, read the reviews, as well as an interview with the person at the center of the story, the perpetrator if you will. Sounds like quite a story.