The rule of thumb is that when you enter a recession, the metrics underestimate the severity of the decline. That was certainly true of 2008-9. But they also underestimate the pace of the recovery.
We are seeing upward revisions to the economic numbers, consumer confidence is rising and jobless claims are down.
I am not especially worried about the fiscal cliff - BECAUSE IT'S NOT A FISCAL CLIFF! Going "over the cliff" would be AWESOME for the federal government's bottom line. Deficits be gone!
The problem with the "cliff" is that it's really an Austerity Bomb.
Except it's not that either.
The austerity that will come with the rolling over of the calender will not take place all at once. Taxes will go up immediately, spending will get slashed immediately, but the effect of those austerity measures won't be felt for weeks or months.
This is why the Democrats are fine "going over the cliff". It completely changes the negotiation calculus, from the Norquist pledge to where the pressure will fall. If the GOP holds tax cuts for the middle class hostage in order to win additional tax cuts for the rich, they will get hammered. The smart ones know this. This is why they are desperately flogging Romney's tax plan now. It's a non-starter, of course. Romney lost and not be a little. That vision was rejected.
But the GOP leaders must know that once January 1st rolls around, the pressure will be on them to approve the tax cuts for everyone, but not the additional cuts for the rich.
The only caveat on the Democratic side is that the recovery - while strengthening - is still weak by historical standards. In large part this is because of austerity in Europe that has tipped them back into a recession. If the austerity bomb finally has an impact here, that would tip things back into recession and ruin the Democrats' hope for a long term hold on the national offices.
But all things considered, a good economic report like this one helps strengthen the Democrats hand even more.