WASHINGTON - THE US economic outlook may look pretty dour from Wall Street, but on Main Street, businesses have cash on hand, consumers have jobs with steady incomes and the battered housing market may be stabilising.

A spate of dismal data has led many analysts to conclude a US recession is likely, a view that seems particularly prevalent on Wall Street, which has been hit hard by the subprime mortgage debacle and a credit crunch.

But some economists say the world's richest economy may have enough strong points to avoid a recession.

At the same time, a closely watched manufacturing index fell below a reading of 50, pointing to a contraction.

That was followed by news of an unexpected decline in retail sales during December to close out 2007 with the weakest yearly gain in spending in five years.

But outside of the financial sector, most companies are not laying off their workers, businesses do not have huge stockpiles of goods they can't sell and corporate profits are fairly steady.

'The preconditions for a recession, I don't think are in place,' said Ken Mayland of ClearView Economics in the Cleveland area.

Business inventories are at record lows in relation to sales, Mayland noted, adding that claims for jobless benefits are not at recessionary levels.

While initial applications for state unemployment benefits have trended a bit higher in the last few months, they're not far out of line with the low 300,000 range they've held for well over a year, according to Labour Department data.

Most economists view weekly claims near the 400,000 level as recessionary.

'Employers for the last few years have kept a tight rein on job creation,' Mayland said. 'Even if demand eases somewhat, there is not an overwhelming need to lay off people.' In fact, 2007 had the lowest number of announced job cuts in seven years, according to Challenger Gray & Christmas, which tracks corporate job cutback plans.

'The housing slump has failed to translate into widespread job cuts outside of the financial sector,' said John Challenger, who runs the Chicago-based firm.

In addition, incomes are still rising.

In November, they were up 6.6 per cent from their year-earlier level, while the narrower category of wages and salaries had gained 5.9 percent, although most of those gains were eroded by inflation, which rose 3.6 percent.

And now trouble in the housing market, which has chopped about 1 percentage point off the economy's annual growth rate in each of the last five quarters, may soon be stabilizing.

Worst almost over for housing?
The National Association of Realtors' Pending Home Sales Index has fluctuated very little over the past four months. The index, which economists view as a key measure of future housing conditions, is based on sales contracts signed; the sales typically close one or two months later.

'If there is any further decline at this point, it will probably be very marginal,' predicted Lawrence Yun, chief economist of the National Association of Realtors, an industry trade group.

He noted the index had shown stability even after credit markets seized up in August.

If pending home sales are stabilizing, that would imply that existing home sales will begin to steady soon and there will be less need in the future for builders to cut back, Mr Yun said.

James Glassman, an economist at JPMorgan in New York, agrees with Mr Yun that the downturn in the housing sector appears to be nearing a bottom.

'Even if housing just stabilizes, the damage to the economy will start to ease,' he said.

In the previous two big housing downturns, in 1975 and 1982-1983, housing starts stood in the range of 900,000 units per year for several months before rebounding. Housing starts in November fell to a unit rate of 1.19 million.

'I think it's safe to say that the housing sector is going to be less of a drag going forward,' said Bill Cheney, chief economist at John Hancock Financial Services in Boston.

Even while housing curbed economic growth, rising exports had completely offset that drag, and economists do not expect a dramatic falloff in exports.

'I think global growth is going to be lower in 2008 than in 2007, but it's still going to be stronger than the US,' Mr Cheney said.