At his blog, former Bush administration economist Greg Mankiw passes along a bit of analysis from a pal in the White House that nicely sums up the economy's stubborn refusal to go into a recession:
One of our favorite words when talking about the U.S. economy is "flexible"—we have extremely flexible labor and capital markets. When bad things happen (e.g., a factory closing, wildfires, housing and credit market troubles), a flexible economy can adjust and recover quickly and with the smallest amount of pain. We're seeing the benefits of a flexible economy now.
My take: That's a great point. Too often people take a static picture of the economy and then try to extrapolate the current scenario forward. Labor and capital are constantly being redeployed. As economist Brian Wesbury puts it: "As housing slows, the resources that would have gone in that direction do not disappear—they get redirected into different sectors of the economy." That's what's been happening, and that's why the economy continues to confound the skeptics.