The question on the minds of many Americans is this: When will our recovering economy really roar back to life? There have certainly been some positive signs, with many, including Federal Reserve officials, predicting continued positive but slow growth into next year.

The primary drags on recent economic performance over 2011 have been the job market and housing. However, I think the likelihood of a double-dip recession, meaning negative GDP growth, is now extremely low.

The fact that our economy has been able to grow in spite of a weak housing market is a testament of its resiliency. A bottoming of housing prices and continued strength in consumer durables spending will continue to firm up economic conditions going forward.

The recent sharp rise in the index of leading economic indicators suggests that GDP will continue to grow into the spring of 2012. If that growth exceeds the 2.5 percent to 3 percent range, it will not be surprising to see unemployment rates dip into the 7 percent range.

As for the composition of the Federal Open Market Committee for next year, there will be another regularly scheduled rotation of four regional Fed bank presidents. The current three inflation hawks will be replaced by just one: Jeffrey Lacker at the Federal Reserve Bank of Richmond. Hence, there may be more movement towards something like a QE3 [third round of quantitative easing], but only if economic conditions remain static or deteriorate and if the core inflation rate does not rise any further.

Federal Reserve chairman Ben Bernanke has been supportive of greater transparency of Fed operations and looking into adopting a more explicit inflation targeting policy. If that is the case, the inflation rate outlook may become a more important indicator of the Fed’s actions for 2012.

Here’s a look at what has happened in 2011 and what is ahead for 2012:

Economic Conditions

The state of the U.S. economy has shown some improvement after a disappointing first half of the year. Although the “discouraged worker” effect, in which unemployed people give up looking for work, contributes partially to the dramatic decline in the unemployment rate to 8.6 percent, without it the unemployment rate would have still fallen by about half that amount which is still positive news for the labor market. If the trend continues, it’s a sign that GDP growth for the last quarter of the year may approach the 3 percent threshold. In recent months, the core inflation rate has risen and slightly exceeded the upper end of the Fed’s comfort zone.

Although some have been suggesting another round of easing through asset purchases, perhaps even a QE3, in light of the positive unemployment numbers and signs of heightened inflation, I doubt we’ll be seeing any significant announcement at the upcoming FOMC meeting this Tuesday. Fed officials remain divided, with the inflation hawks (Federal Reserve presidents Charles Plosser of Philadelphia, Richard Fisher of Dallas, and Narayana Kocherlakota of Minneapolis) showing resistance to “operation twist” even though it kept the Fed’s balance sheet from growing, and the doves who have been the primary advocates of the recent easing policies (Federal Reserve President Charles Evans of Chicago even dissented at the last meeting because he felt the Fed was not accommodating enough).

Even though the Fed did accommodate European central banks by lowering their international lending rate this past week, I don’t believe that situation will have a major effect on U.S. monetary policy unless it becomes much worse. Institutions like the IMF will still be the major player in stabilizing international financial markets. The Fed’s statement will acknowledge the improving conditions, state that there is still considerable softness in job creation and housing, and maintain its near-zero Fed funds rate policy for the foreseeable future.

Inflation

Inflation was up 3.5 percent in September from the same this time last year, and down from the near 4 percent annual rate last month. Core inflation is currently at an annual rate of 2.1 percent, which is still at the very upper end of the Fed’s 1 percent to 2 percent comfort zone.

Unemployment

The rate of unemployment fell to 8.6 percent, the lowest in more than 2 1/2 years. Net job growth was 120,000, an increase from 80,000 in October. However, labor force participation fell and that contributes to the decline in those counted as unemployed.

GDP Growth

Third-quarter 2011 GDP growth was revised downward to 2 percent, but still confirms an upward trend for this year. There was considerable strength in consumer durable goods spending which is always a good sign as it is a leading indicator.

Housing

Housing prices remain weak, falling nearly 4 percent year-to-year for the third quarter of 2011, but the pace of decline was slower than in the second quarter, so there maybe signs of a bottom. Residential investment expenditures continue to increase in the third quarter as well and there was a sharp rise in housing permits last month.

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Victor Li is an associate professor of economics at the Villanova School of Business. He worked with Federal Reserve Chairman Ben Bernanke at Princeton University from 1998-2000. He was also a visiting scholar at the Federal Reserve Bank of St. Louis, and a senior economist at the Federal Reserve Bank of Atlanta from 2000-01.