U.S. out of slow lane, but can’t find fast lane

What’s the new normal? An economy growing around 2%, workers’ wages rising about 2% a year and roughly 150,000 jobs being created each month. Read latest employment report.

Not bad, but well below the nation’s typical performance. At this stage of a recovery, the U.S. economy normally grows around 3% a year and adds upward of 200,000 jobs a month. Wages also tend to rise a bit faster.

“The economy is growing, but not fast enough to move the needle in terms of its potential,’ said Steve Blitz, chief economist at ITG Investment Research. “We are on a low-trajectory growth rate.”

Investors won’t get any evidence to show otherwise this week, either. The economic calendar is extremely light, highlighted by the U.S. trade deficit and secondary reports on weekly jobless claims, small-business activity and the price of imported goods.

“The data is not going to be driving much activity this week,” said Julia Coronado, senior economist at BNP Paribas.

Several top officials at the Federal Reserve are also slated to give speeches. Although the central bank is not expected to change its strategy soon, markets always pay close attention to what Fed VIPs say.

In the middle lane

The trajectory of the U.S. economy has been remarkably stable — some would say flat — over the past two years. In both 2011 and 2012, the U.S. had created an average of 153,000 jobs a month.

The modest increase in jobs dovetails with modest growth in the economy. In some ways, the U.S. has been remarkably resilient despite a number of headwinds, such as a housing bust, manufacturing slowdown, frequent U.S. budget fights, European financial crisis and a global economic slump.

The problem is, the economy can’t break out of its slow-growth straitjacket and conditions are still not ripe for faster recovery.

The early part of 2013, what’s more, will generate fresh headwinds.

For one thing, a temporary tax cut applied to worker’s paychecks in 2012 has lapsed. That will cut take-home pay by 2% a week for most U.S. employees. A person earnings $50,000 a year before taxes, for example, will pay an additional $1,000 to the government.

Another big budget fight in Washington, meanwhile, looks increasingly likely. The ability of the U.S. to pay its debt could be temporarily impaired unless Congress raises the legal limit on how much the government can borrow.

Republicans who control the House say they won’t raise the limit unless President Obama agrees to deep spending cuts over the next decade, including some reductions in 2013 that could also act as a drag on the economy. The White House insists it won’t negotiate.

A similar face-off in the summer of 2011 disrupted U.S. and global financial markets and briefly threw the economy out of whack.

What should help the economy over the next few months, on the other hand, is the sharp drop in gasoline prices. Lower fuel costs for consumers could offset part of the drag caused by the expiration of the payroll tax break.

The result is that wages are now expanding somewhat faster than inflation, a big reversal from earlier in the year. Hourly earnings have climbed 2.1% in the past 12 months, compared with a 1.8% increase in inflation.

By and large, most economist expect the U.S. to continue along its current growth path through the first half of 2013. Some predict — and hope — for faster growth at the back end of the year.

If that last two years are any indication, however, the new normal might be here awhile.

“This year we are going to absorb a lot of fiscal tightening,” Coronado noted.