Believe it or not! The current U.S. economic expansion is now completing its second year! Break out the champagne … or perhaps not.

Forecasts of American economic growth in coming quarters have been trimmed in recent weeks, falling victim to the "anxiety list." This is a combination of factors that simply make it easier for American businesses to largely sit on their collective hands as far as expanding employment, with a similar performance (or lack thereof) from the consumer in regard to spending.

Domestic angst

How will the current battle of wills in Washington, D.C., play out? Will we get an agreement between the Democrats and the Republicans to increase the debt ceiling before Aug. 2? Will the U.S. temporarily default on its trillions of debt? Will Republicans get the kind of future spending restraint they are demanding, in exchange for their votes to increase the debt ceiling?

Once the debt ceiling is finally boosted, will Democrats and Republicans make necessary inroads to long-term deficit reduction? How will the three major entitlement programs be addressed? Will they "kick the can down the road" even further, letting voters decide in November 2012 which party's ideas are best to address financial sanity in this country? Will tough decisions then actually be made?

Will home prices continue to decline? Will the stock market suffer a major setback? Will the massive and top-heavy health care bill place event greater burdens and mandates on American businesses and households? Will the never-ending growth of new government rules and regulations ever slow?

Global angst

How will sovereign (national) debt issues in Europe be resolved? Will Greece default on its enormous national debt in coming weeks? How will the Greek situation impact Ireland and Portugal, two other nations that have required enormous financial bailouts? Will Spain be next?

How will political and military battles across northern Africa and the Middle East ultimately play out? How will these issues ultimately impact oil prices?

Will the global economy continue to slow somewhat? How will this impact energy and commodity prices? How will it impact U.S. exports to the world?

The "anxiety list" above is the primary contributor to lesser expectations for U.S. economic growth. The consensus view of 4-6 weeks ago that the economy would grow at a 3 percent-3.8 percent real (after inflation) annual rate over the next 12 months is now closer to a 2 percent-3 percent growth pace. Some forecasts are more dismal, with possible double-dip recession again on the lips of the "doom and gloomers."

U.S. employment

May's dismal jobs report was the weakest of the past eight months, adding to a multitude of softer-than-expected economic data points in recent weeks. The gain of only 54,000 net new jobs was one-third of expectations and one-fourth that of the prior three-month average. Adding insult to injury, job gains of the two prior months were revised down by 39,000 jobs.

Private businesses added only 83,000 jobs during May, the smallest gain in 11 months. Government employment fell by 29,000 jobs, with job cuts at the local level the focus. Additional job eliminations in state and local government are widely expected during the next 6-12 months.

Goods-producing employment rose by an anemic 3,000 jobs in May, with a small loss in manufacturing jobs largely offsetting small gains in construction and mining and logging. Private sector service-providing employment rose by 80,000 jobs in May, led by gains in professional and business services and education and health services.

The nation's unemployment rate rose to 9.1 percent in May from April's 9 percent rate. We have long suggested that the unemployment rate could move higher at times during 2011 as more people return to the labor force. This was certainly the case in May, with a labor force increase of an estimated 272,000 people.

U.S. inflation

The Consumer Price Index rose 3.2 percent during the most recent 12-month period, exceeding the 1.8 percent rise in average hourly earnings during the past year. Sharply higher prices for gasoline and basic foodstuffs have strained household budgets, in both the U.S. and around the world.

The Federal Reserve

Tough choices are ahead for this nation's central bank. It seems clear that the 0 percent-0.25 percent target range for the federal fund rate, now in place for 30 months and the lowest level ever, will likely remain unchanged until the end of the year, if not longer.

However, issues involving additional massive monetary stimulus are up in the air. The Fed has indicated that the second round of "quantitative easing" — known as QE2 — will run its $600,000,000,000 course this month. Will the Fed enact QE3? Most forecasters would vote no, fearing the Fed could endanger its inflation-fighting credibility with even more unprecedented stimulus.

U.S. housing

The pain continues. By one major measure (the S&P/Case-Shiller Home Price index), average home values have declined for eight straight months and are now back to where they were nine years ago, in 2002.

Average prices are down one-third from their 2006 peak. Another survey notes that lower-priced homes have fallen further than high-end homes. Most forecasters see modest additional pain over the balance of the year, with price stability not likely until early 2012.

Mortgage rates

With 30-year fixed-rate conventional mortgage loans at their lowest level of the year, and very close to their lowest level in 50 years, one might think mortgage activity would be brisk. Not exactly. The combination of declining home prices, meager job creation, weak confidence levels and wary lenders in many cases has led mortgage demand to its lowest level in 13 years, according to The Wall Street Journal.

The global economy

The two largest economies in the world, the U.S. and China, are both slowing down. Number three (Japan) is flirting with recession. Europe is dealing with sovereign debt anguish, even as the German economy is doing well.

South America is growing, led by solid Brazilian performance. Mexican economic growth during 2010 was the best in 10 years, even as drug cartel violence spreads. The Canadian economy has slowed in recent months.

From here?

Many unknowns, many pitfalls, many opportunities. American consumers, the ultimate key to U.S. economic strength or weakness, will weigh the "anxiety" issues going forward. Global issues don't typically fall into our sphere of influence.

On the other hand, domestic issues do. A little clarity (and progress) from key players in the nation's capital would pay solid dividends, boosting consumer and corporate confidence.

Jeff Thredgold is the chief economist for Zions Bank and founder of Thredgold Economic Associates, a professional speaking and economic consulting firm. Visit