Let's be clear: The economy is not falling into the abyss.

True, the 10-year Treasury note has been surging recently and the Nasdaq has declined for six out of the last seven weeks. Yes, Friday's employment report for February was a big disappointment and expectations for an interest rate hike have been pushed out until much later this year. But economists have not been lowering their projections for economic growth in 2004.

In fact, estimates have been increasing.

A recent Blue Chip poll shows that economists are now expecting growth of 4.7% this year, based on a solid outlook for consumer spending and a strong rebound in business investment. A host of companies also seem optimistic about the outlook.

Industrial manufacturer Danaher ( DHR) boosted its first-quarter and full-year earnings targets Wednesday, saying the economic recovery has continued to accelerate.

On Tuesday, diversified industrial company Ingersoll-Rand ( IR) raised its first-quarter profit forecast to a range of 70 cents to 80 cents a share from a previous range of 65 cents to 75 cents a share. The company, which is often considered a good proxy for the strength of the overall economy, cited strength in many of its end markets.

Meanwhile, automation-equipment maker Rockwell Automation ( ROK) said it expects second-quarter earnings above Wall Street's estimates, and computer products vendor CDW Corp. ( CDWC) said average daily sales in February rose 31%. Earlier this week, Texas Instruments ( TXN) said first-quarter results should hit the high end of its estimates.

Earnings from cyclical companies, whose fortunes rise and fall along with the economy, are expected to be up sharply this year. Profits from basic-materials companies are seen rising 53% in 2004, while industrial firms are expected to show earnings growth of 14%, according to Thomson First Call. Consumer cyclicals, which includes retailers and autos, are forecast to grow profits by 17% and the S&P 500 overall is slated to produce a 13% jump in earnings this year.

So are stock and bond traders' concerns about the economy unjustified? Well, not entirely. Although economists expect growth to be strong over the coming quarters, their forecasts are based on large tax refunds, which haven't yet materialized, as well as an improvement in the job market.

Wall Street has been benefiting from a weak labor market recently because sluggish job growth keeps costs down and profits high. But without robust job gains, the economy could ultimately find itself on shaky ground.

"Jobless recoveries aren't sustainable, and this one risks living on borrowed time," said Morgan Stanley economist Richard Berner.

Tax refunds could carry consumers through the spring and a wave of refinancing could spur further spending. However, energy prices remain high and unless stronger job growth starts to materialize, Berner said, "consumers would ultimately lack the wherewithal and lose the confidence in the future (that is)required to sustain spending."

Tom McManus, equity strategist at Banc of America, said companies might be overly sanguine about the outlook right now for political reasons.

"We still believe that CEOs will want to display a more upbeat attitude regarding the economic outlook as they are boarding the Bush re-election bandwagon," he said.

Others say they worry about a slowdown in the Chinese economy, which has been a huge source of demand recently. In addition, the weaker dollar has not yet helped to shrink the trade deficit. In January, the deficit widened to a record $43.1 billion from $42.7 billion in December, and some economists say declining exports will shave roughly 0.25 percentage points off growth in the first quarter.

With the fourth anniversary of the Nasdaq's peak upon us, there's plenty to feel gloomy about, and not without reason. But fiscal stimulus is likely to boost consumer spending in 2004, and with interest rates projected to stay low through most of the year, it's safe to assume the economy isn't about to fall off a cliff.