When you find yourself on a precipice, the standard advice for keeping calm is to not look down. Next year, don't look up.
At the 30,000-foot level, the world's economy appears as stormy as it's been since the financial crisis blew over. Europe remains mired in debt. China faces a slowing growth rate and an expanding housing bubble.
Here at home, fears about how the government would handle the fiscal cliff -- the tax hikes and budget cuts that were set to start kicking in at year's end -- frightened businesses into delaying capital spending and hiring, erasing what little momentum the economy had going into 2013. Tilt your gaze toward ground level, though, and the picture brightens. Dark shadows that cast a pall over consumers are beginning to lift as the housing and job markets slowly warm. Prepare correctly, and these strange conditions present opportunity.
In Money magazine's Make More in 2013, you'll learn how to get more investment income at a time of super-low rates, why, as a prospective home seller or buyer, you need to stop sitting on your hands, and how you can start exploring job opportunities again. Up first: A look at the U.S. economy and what's contributing to a rosier outlook for growth.
Why is the view from terra firma so much better than from up high? Three words: employment, debt, and housing.
Jobs are coming back. Hiring is hardly robust yet, but the unemployment rate is well off its 10% peak. By this time next year, the economy should be adding 173,000 jobs a month, up from this year's 157,000, according to the National Association for Business Economics.
"We'll see a slow but steady increase in employment throughout the year," says Sean Snaith, economics professor at the University of Central Florida. "The pendulum is shifting toward workers again."
How quickly that pendulum shifts depends in part on how soon the fog over taxes and budget cuts lifts. Businesses are in a holding pattern, but they're in far better financial shape than since the credit crisis.
Consumer debt is shrinking. The balance sheets of American families look fairly healthy too. Consumers have been working down their levels of installment debt, and that, combined with low borrowing rates for houses and cars, has eased payment burdens significantly.
"We're not going to be another Japan, which lost two decades dealing with debt," says Hank Smith, chief investment officer at Haverford Trust. "In the corporate and household sectors, that's s already taking place."
Finally, housing is coming back. For five years the real estate market has cast the longest of shadows. Now the sun is overhead.
In many areas, the inventory of homes on the market is down 20% or more from just a year ago. Nationwide, there are 1.8 million houses for sale. At the peak, in the summer of 2007, that figure was more than twice as high. Sales of existing single-family homes, meanwhile, jumped 11% in the 12 months through September. Demand should remain elevated as the Fed keeps buying bonds so mortgage rates stay low.
And for most families, their home -- not stock portfolios -- is their biggest asset.
"The wealth effect tied to housing can be quite powerful," says Diane Swonk, chief economist for Mesirow Financial. No wonder consumer sentiment is as high as it's been since 2007.
A boom in new-home construction would fuel jobs -- and vice versa, says Patrick Newport, economist at IHS Global Insight. Each new home that's built creates an average of three jobs for a year. That's not factoring in the ripple effect -- for instance, among retailers as folks buy furniture and appliances for their new homes.
The good news: Housing starts surged to an annual rate of 872,000 this year, the highest since the financial crisis. And that's expected to rise to 900,000 in 2013.
The timing couldn't be better. Many economists think Congress and the White House will eventually settle on a package of belt-tightening measures -- to cut the deficit -- amounting to 1% to 1.5% of GDP.
Historically, housing has accounted for 5% of GDP. Today it's half that. If real estate investments jump by a percentage point or slightly more of GDP next year, the economy could absorb the shock of austerity and hit its expected 2% growth rate. Not great, but not a disaster.
The Money tracker: What can upset the forecast in the year ahead...
A military strike on Iran. An Israeli attack against Iran, to keep Mahmoud Ahmadinejad from getting a nuclear weapon, would push gas above $5 a gallon, tapping the brakes on growth.
Grownups take over. Who's to say that the White House and Congress can't hash out an agreement on taxes and spending -- or at least kick the can far down the road?
New world governments. The global economy's road to recovery could be detoured by a change in leadership in Beijing this year and elections in Germany and Italy in 2013.
A rebounding euro. A rising euro would not only boost the U.S. manufacturing recovery, but also currency gains would signal Europe's crisis is abating.
Spain refuses aid. The European Central Bank is willing to buy Spain's bonds to keep the troubled nation from a debt spiral. Will Prime Minister Mariano Rajoy be too proud to ask for help?
A trade war in Asia. A dispute over who owns tiny islands in the Pacific has touched off a feud between China and Japan. An escalation could suppress trade in one of the few regions that are growing.
Make more in 2013: