Economy began shaky, finished strong

WASHINGTON -- The U.S. economy flexed its old muscles in 2014.

More than five years removed from the recession, worries had taken hold at the start of the year that perhaps the world's largest economy had slid into a semi-permanent funk.

But consumers, businesses and investors, after enduring a brutal winter, showed renewed vigor as the year progressed and set the United States apart from much of the world.

Stocks repeatedly set record highs -- and did so again Friday, with the Dow Jones industrial average rising modestly to a peak. Employers were on pace to add nearly 3 million jobs, the most in 15 years. Sinking oil prices cut gasoline costs to their lowest levels since May 2009. Auto sales accelerated. Inflation was a historically low sub-2 percent.

The U.S. economy proved it could thrive as the Federal Reserve ended its bond buying program, which had been intended to aid growth by holding down long-term loan rates.

All told, the United States remained insulated from financial struggles surfacing from Europe and Latin America to China, Japan and Russia.

So what explained the U.S. economy's resilience?

Economists say it largely reflected the delayed benefits of mending the damage from the worst downturn in nearly 80 years. Unlike past recoveries that enjoyed comparatively swift rebounds, this one proved slow. It took 6 1/2 years to regain all the jobs lost to the recession -- 8.7 million -- far longer than during previous recoveries.

"It was a healing process from a severe recession and the financial crisis," said Richard Moody, chief economist at Regions Financial, a bank based in Alabama.

Here are a couple of economic highlights of 2014:

Hiring boom

Employers added 2.65 million jobs over the first 11 months of the year, and the unemployment rate sank to 5.8 percent from 6.7 percent. When the government announces the December job data next month, the 2014 job total is expected to be just shy of 3 million -- the most since the dot-com era in 1999. Compared with recent years, those gains have been less concentrated in lower-paying industries such as retail, food service and temp agencies.

"We're finally entering that virtuous cycle phase of the expansion" when more jobs lead to higher incomes, which generates more consumer spending and growth, said Brett Ryan, an economist at Deutsche Bank.

Though average wage growth has been modest, the number of people with paychecks -- and the ability to spend -- has soared. If you exclude the economy's winter-induced 2.1 percent annual contraction in the first quarter of the year, annualized growth has averaged 4.4 percent in four of the past five quarters. That's far above the historic average of 3.2 percent in the decades after World War II.

Oil prices plunge

In a gift for U.S. consumers, energy got cheaper. Crude oil prices were cut in half from this year's high. Slowing economies in Europe and Asia curbed demand, and production remained steady. The price decline trickled down to gas pumps. Average prices nationwide dropped to $2.32 a gallon, down a dollar from a year ago, according to AAA. Some of that price slowdown has hurt U.S. oil producers, which must weigh layoffs. But overall, cheaper oil is a positive. Federal Reserve chairwoman Janet Yellen noted the falling prices resemble a tax cut, generating savings for consumers that can be spent elsewhere to drive economic growth.

Auto sales up

Far more Americans splurged on a new car after having held onto aging vehicles during the recession and slow early stages of the recovery. Sales were on track to increase 6 percent this year, with 16.5 million new vehicles on the road, according to Cars.com. That would be the best sales pace since 2006.

Interest rates drop

Even as the economy has strengthened -- usually a sign that interest rates will rise -- it's become easier to borrow. More loans mean more spending and faster growth. Rates have declined even though the Fed ended its program to stimulate growth by buying billions in Treasury and mortgage bonds each month.

The yield on the 10-year Treasury note has slipped to about 2.27 percent from 3 percent when the year began. The average 30-year fixed mortgage is 3.83 percent, down from roughly 4.5 percent a year ago.