The big chill continues. Consumers are still hoarding money. The U.S. can't generate much heat in its GDP growth. The total number of unemployed and underemployed has reached 17% (which includes part-timers and those who have stopped looking for work).

Companies may be seeing their profits increase at record levels year over year (they hit record profits in the third quarter of 2010), but they won't be spending this money on the expensive American worker. As economist and author Todd Buchholz put it at a recent NAPFA conference in San Diego: Imagine an American worker walking around with a sandwich board that says, "I'm expensive and I don't know much."

Meanwhile, the Fed keeps pouring money into the economy to get a fire going, but even with the looser monetary policy, there hasn't been much of a thaw. The economy has seemingly landed on the glacial ice, but people can't agree on how to push the ship off.

"We're still dealing with a number of headwinds," says Scott J. Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla. "We have continuing problems in the residential mortgage area, you've got state and local government budgets that are under enormous strain. Credit is still pretty tight, particularly for small firms and consumers, and you have the federal fiscal stimulus which will be starting to ramp down next year."

And it seems like anytime people start to feel hubris about the economy coming back, more bad news comes down from Mount Olympus: In December, the Labor Department reported only 39,000 new jobs added in November, down from 172,000 in October.

Economists have largely stopped worrying about a double-dip, "W" shaped recession, but it doesn't mean there's going to be a "V" shaped bounce-back either. In past recessions, GDP growth has often surged forward 6%, 7% or 8% in the first year of recovery (after the 1981-1982 recession, the U.S. saw six quarters of growth above 5%). Compare those numbers to what's expected for 2011: the consensus is predicting that GDP will squeak along at 2% or 2.5% next year, with only a little bit of a pickup in the second half.

In other words, the growth is going to be slow as molasses in January (and February and March and April ... . ). And depending on how much Prozac you're taking, you could even say the recovery will take years, not months, to get back on track. Even if real GDP reached 4%, it would still take five years to get the unemployment rate down from 10% to 5%, wrote Mary Ellen Stanek, chief investment officer at Baird Advisors, in a recent release. That leads to a vicious cycle of inhibited growth.

"We have not created enough additional income, to create enough additional demand, to create enough additional supply, to create enough additional jobs, so that we're creating more jobs and so more people are working," says Jerry Webman, chief economist at OppenheimerFunds.

So why the slow recovery?

"Normally, there is a sector that brings you out of downturn," says Quincy Krosby, a chief market strategist at Prudential Annuities. "We had the tech sector hiring when we came out of the downturn that preceded the tech boom. After that we had private residential real estate. And remember, on private residential real estate that's predicated on the consumer. So this time, we come into this downturn with a heavily indebted consumer, way down in one of the most important parts of the individual portfolio, which is housing. The negative wealth effect of housing is a drain."

Consumers saddled with debt are finally being virtuous, unwinding the leverage they built up in the years before the recession, and boosting their savings rates to around 4% or 5%. That goes hand in hand with sapped confidence. The values of their houses have shrunk with the collapse of the housing bubble, their stocks buckled in the market crash, and their credit has evaporated. They likely know people down the block who have lost their jobs. So the extra money that would otherwise go toward new cell phones, cars, TVs and shoes is now going to pay down obligations. The good news is that in the long term, their more parsimonious behavior will stabilize the economy. But in the short term it means a lot of pain, since personal spending makes up more than two-thirds of the GDP.

The resulting deflationary spiral has prompted the Federal Reserve to fight back with extra monetary stimulus, lowering short-term interest rates to zero. When the Fed announced further stimulus in November-a quantitative easing initiative to buy up some $600 billion in long-term Treasury debt-to get back to its 2% inflation target, some economists were less than gaga about what they saw as a new round of froth. Opponents say the extra liquidity won't help much, and fear a nasty hangover from the inflation that will inevitably result.

Mark Luschini, the chief investment strategist at Janney Montgomery Scott in Philadelphia, says the quantitative easing plan seemed like a good idea when it was first floated in the middle of the year. "It seemed like it was a necessary evil, and in fact just by talking to the notion that the Fed was going to be moving toward pumping more liquidity into the marketplace, equities rallied about 15% prior to the actual declaration. So jawboning the notion of it did the work." But now there's a camp that thinks only organic growth will do, and these people are calling for the Fed to raise its liquidity siege.

Scott Tatum, director of The Advisor Institute at AllianceBernstein, was more severe when talking about what could happen if there's too much monetary easing when he spoke at the NAPFA conference in San Diego on September 22. "I know the fire is not going really well right now, but when you keep pouring gasoline on it, when the spark hits, it burns your eyebrows off. It's not good. It'll be a fireball when it comes out."

As some discuss whether monetary policy has led the U.S. into a liquidity trap, others ponder what exactly would help goose the economy forward. Democrats and newly empowered Republicans in the House of Representatives have begun squabbling over whether the taxes on the richest Americans should increase with the expiration of marginal tax cuts enacted in 2001 and 2003 (the so-called "Bush tax cuts.") If taxes rise on the wealthiest on January 1, it might crimp economic growth. After all, luxury goods providers are starting to see their inventories moving again. But if taxes remain at the marginal rates of the Bush era, an already yawning government deficit could grow to an even higher percentage of GDP over the next 10 years, according to the Congressional Budget Office. That also means a greater risk of inflation in the long term.

In a spirit of compromise (or procrastination), President Obama and House Republicans on December 6 reached a deal to extend across-the-board cuts at all income levels for another couple of years, in exchange for extended unemployment benefits, thus putting another temporary fix on tax cuts that were supposed to be temporary in the first place.

In any event, the uncertainty about taxes, as well as the effects of the health care reform legislation and the expiration of some government stimulus packages, has eroded the confidence among small business owners and corporations, says Krosby. "If we can ease the credit, ease credit particularly for small business owners, and also get some clarity on the tax situation, and if we can get small business owners engaged in the economy, we could see GDP move a little bit more than where it's been sort of crawling toward," she says.

Small businesses make up 50% of new job generation, which makes them the "central part of the economic mosaic," Krosby says. However, uncertainty about growth and their lack of access to credit have made smaller employers finicky about hiring new employees.

The biggest obstacle in getting jobs to the unemployed was the output gap. Capacity utilization was running at about 74.8% in October, down from its average of 80.6% from 1972 to 2009. That means frugal companies are making more profits off less labor. U.S. companies, even though they have become profitable again, aren't interested in hiring American employees until they see GDP rise to higher levels.

"Larger companies are very mindful of their bottom line," says Krosby. "That's been a very clear theme coming out of the last couple of quarters-that until they see U.S. GDP picking up or demand picking up in the U.S., they are going to be very nimble and very careful about their hiring here in the U.S."

A lot of people are asking why high unemployment, a lagging indicator in a recession, has this time around stayed so high for so long. Some blame the cyclical nature of downturns. Some blame globalization-since workers are cheaper overseas and more attractive to companies slimming down as they come out of market slumps. But there are demographic issues and structural issues harming U.S. employment this time around, says Brian Gendreau, professor of finance at the University of Florida and a market strategist at Financial Network.

"There are structural forces in play," Gendreau says, "which is bad news because these are really somewhat more intractable than just reducing unemployment through stimulating the economy. A lot of the unemployment is concentrated in manufacturing and construction. Those are industries that were very hard hit in the last recession. And retraining those workers is very difficult. It's very hard for a worker in manufacturing and construction to become an X-ray technician."

Other structural problems, he says, are Americans' hampered mobility. In the past, they could move to find work. But now they are stuck in houses they can't sell because of the residential home glut. Others see structural problems in extended unemployment benefits, which they argue discourage people from seeking work.

Or it could be that the problems this time are different simply because this recession wasn't like others, but instead was caused by leveraging at every level of the economy-debts that are going to take a long time to unwind. Erik Weisman, an economist and portfolio manager at MFS Investment Management, points to studies by Carmen Reinhart and Kenneth Rogoff suggesting that we are only in the middle of the recovery, because it could take as much time to unwind leverage as it did to build it up. The previous two recessions in the U.S., he says, were mild, and didn't open up a big output gap. There was not a lot of excess capacity and excess labor as there is now.

"There's a great symmetry in that," he says. "You can make an argument that time zero is 2002, in which case it's a five-year bubble and it should take five years to unwind. Maybe it's 1997, in which case it's ten years. Maybe it's 1987. We don't know the answer. But what I do feel pretty comfortable with is the notion that we are only in the sixth quarter of this recovery. The ramifications from this recovery will be felt for several more years."

Weisman points to the 1960s and 1970s as years when the leverage in the system was less and when monthly seasonally adjusted nonfarm payrolls rose at a steady rate of 3% per year or so. In the 1980s, he says, those trends reversed: Debt to GDP started to increase, and at the same time, labor and GDP growth both started to see negative downward trend lines. Though he says there's not a correlation, per se, the trends might be associated.

"My supposition would be that in the '50s, '60s and '70s, if you had a good investment idea ... and you're not levering that thing up, it's got to be a good idea. You need labor and capital for that idea to work. As we're able to lever these things up, you can now come up with bad ideas that maybe will only give you a 1% to 2% return. Levered up ten times, now it's a great idea. But you sure don't need a lot of labor and capital to do that."

He says he's waiting to see if deleveraging results in better investment opportunities.

Is there any reason for optimism for the economy otherwise? If so, it might be overseas.

"The emerging market looks pretty good," says Gendreau. "Latin America is growing at rates it hasn't seen in a generation. I don't see anything that would derail that in 2011. So that story is intact." Though some countries like India and China are trying to slow their growth a bit, which will affect the U.S., those same countries are still going to be seeing increased demand, and the U.S. has a good chance of participating in that.

"That will be good news for exports," says Krosby. "Exports have played a prominent role more and more in the GDP numbers, and that, coupled with inventory rebuilding, has to give way to manufacturing, to retail spending. It already has started that process."