In the last post we examined the decline in consumer demand and what it meant for employment, which left us asking: What about the future?

I have been spending a great deal of time recently developing an analysis of the U.S. economy, which I presented at Commonwealth’s National Conference. The key issue for everyone is jobs and employment. Why has the recovery been so slow, what can we do to make it better, and when can we expect it to get back to normal?

The good news on the real economy continues, with consumer confidence hitting a five-year high, per the New York Times (NYT) over the weekend. We are now at a level that is pretty close to the historical average, which illustrates just how bad things have been from a consumer point of view. A five-year high just gets us back to the average? Much of this is due to improvements in the current conditions index, which is mostly about the labor market, and improvements in expectations.

One of my major reasons for cheer about the U.S. economy has been the evolving energy situation. Breakthroughs in oil and gas drilling have made U.S. prices for natural gas the world’s lowest and have started us on the road to again becoming the world’s largest producer of oil, as well as potentially making us energy independent.

Beyond that, though, we are developing other energy-producing technologies that are more sustainable and more diversified. I have debates with friends about the role these will play going forward, but, in my opinion, there’s no doubt that having the technologies developed makes us more secure. There’s nothing like having a backup plan.

Once again, the papers lead with the fiscal cliff: “Pressure Rises on Fiscal Crisis” from the front page of the Wall Street Journal, “Congress Sees Rising Urgency on Fiscal Deal” from the New York Times, and “Schumer appeals to business on the fiscal cliff” in the Financial Times.

The good news is that everyone gets it, and both parties seem to feel a sense of urgency in dealing with this. Speaker Boehner has gone on record saying that additional revenue could be doable—which might be a concession, or might not. The President has been quoted saying he doesn’t think we will go off the cliff, but he hasn’t said why not.

Bob Woodward is known for writing books that let readers imagine that they are first-hand witnesses at critical political events. With a depth of reporting and access matched by few, he specializes in telling the stories that affect our lives as played out in Washington, DC.

Wow, that was quick. The markets celebrated Obama’s reelection with a quick drop as investors shifted their focus to the problems in Europe and the fiscal cliff here in the U.S. All three papers headlined with the fiscal cliff in one way or another this morning. The Wall Street Journal and New York Times (NYT) addressed it explicitly, with “Focus Moves to ‘Fiscal Cliff’” and “Back to Work: Obama Greeted by Looming Fiscal Crisis,” respectively, while the Financial Times (FT) caught up on the election with “Obama wins but new battle looms.”

Yesterday’s market dip was significant, the largest of the year in both points and percentage for the Dow. It also took the market below psychologically significant breakpoints, at 13,000 for the Dow and 1,400 for the S&P 500, and put it closer to its 200-day moving average—another potentially important breakpoint. Now that we’re past the election, the market is focusing on the next set of challenges, and it doesn’t much like what it sees.

Now that the election results are in, it is time to think about what they mean for your financial future. Even though the government will remain pretty much the same for at least the next two years, taxes will be changing substantially next year, and we can make some educated guesses about how they will be changing after that. Finally, we need to consider what the pending fiscal cliff might mean to our financial health and how to prepare for its effect.

You’re likely aware that the fiscal cliff refers to the package of tax increases and spending cuts scheduled to take effect, absent Congressional action, at year-end. The chart illustrates the various components included in the fiscal cliff; each one would be significant on its own, but taken together, they could prove disastrous for the economy.

So, here we are, pretty much exactly where we were yesterday, but now it all looks different. Democrats are happy, Republicans are depressed, and the government will look the same for the next four years as it has for the past four.