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The mild recession of 2001 was exacerbated by the terrorist attacks in September, which temporarily dented business and consumer confidence. That in turn boosted unemployment, which reached 6% of the workforce by early 2003. The Democrats had hoped to make the economy, and the jobless recovery, the central issue of the 2004 presidential campaign. .
But by the end of 2003, the economy appeared to be back on track, with an annualised growth rate of 8.2% and falling unemployment. .
Jobless recovery .
The jobless recovery has been caused not only by the economic slowdown, but also by the rapid growth of productivity, which means that firms can produce more goods without having to hire more workers. .
The remarkable growth of productivity, which seems to be growing by at least 2.5% annually - double the rate in Europe - will lead to higher real wages for US workers in the long run. .
That high productivity has also helped keep inflation low and that in turn will encourage the US central bank, the Federal Reserve, to leave interest rates on hold at a 40-year low of 1%. .
Low interest rates have also boosted the housing market, and encouraged people to re-mortgage their homes, releasing capital into the economy. .
But consumers have borrowed heavily to boost consumption, and the debt overhang is another factor that has left the Fed reluctant to increase interest rates. .
Feel-good factor .
However, the good economic news has yet to filter down to the voters. President Bush's approval ratings for his handling of the economy have been consistently lower than his overall poll ratings - but they are improving. .
Recent polls by the New York Times/CBS News suggest that while only 37% approved of Mr Bush's economic record in late September, nearly half (49%) did so by mid-December 2003. .
And over half (55%) now think that the economy is in "good" or "fairly good" shape. Meanwhile, nearly 40% think it is getting better - double the number earlier in the year.