The calendar is changing, but Wall Street's worry list remains the same.

Real estate is softening. Energy prices and interest rates are high, raising the specter of inflation. Consumer spending feels spotty. The trade and budget deficits are widening just as the baby boomers ponder retirement. Sound familiar?

If this year's denouement reminds you of last year's, then the stock market's tepid progress in 2005 makes sense. The S&P 500 finished the year with a gain of 3.2%; it barely beat the 4.4% yield offered on Treasuries when adjusted for dividends. The Dow Jones Industrial Average shed 0.4% before dividends in 2005, while the Nasdaq rose 1.5%

"The stock market has been going sideways for a very long time now, and it looks to me like it will continue to do so," said John Bollinger, president of Bollinger Capital Management.

Some investors took a 4.1% growth rate in third-quarter GDP as evidence the recovery is alive. They say the stock market is girding for the next leg of its bull run, citing the 215,000 new jobs created in November, and the historically low unemployment rate of 5%.

Any disappointment in next Friday's employment report on December could kill that optimism, especially because the economy has yet to add a healthy number of jobs every month on a consistent basis. Economists expect the government to report that the economy added 200,000 jobs to nonfarm payrolls in December.

"It's clear that employment growth this time around has been sub-par compared to previous economic recoveries," said Paul Mendelsohn, chief economist with Windham Financial Services. "You need about the number of jobs that we're adding now just to stay even with the number of people entering the economy. It's very possible that we're going to continue to see sub-par growth."

So far this year, on average, the economy has added about 167,000 jobs a month. In 1997, when GDP grew at 4.5%, the economy added an average 280,000 jobs a month. In 1998, when GDP added 4.1%, the economy added an average of 250,000 jobs a month.

In early 2006, General Motors ( GM) and Ford ( F) are both planning tens of thousands of job cuts as their market share in North America continues to decline. Automakers are scheduled to report December sales of cars and trucks on Wednesday, with more market share losses for Detroit expected.

There have been other rumblings of job cuts in places like the media industry, where Time Warner's ( TWX) magazine publishing unit has announced reductions along with newspaper companies like The New York Times ( NYT).

Wage growth also has been stagnant, suggesting the economy is not yet out of the woods on the employment front. Meanwhile, markdowns were the rule for retailers in a cost-conscious holiday shopping season. Consumers could finally be ratcheting back on their spending as the wave of home refinancings dissipates, interest rates rise and gas prices remain high.

On the other hand, low prices for laptops and flat-screen TVs are keeping inflation worries at bay. While the 17% rise in oil prices this year has goosed the headline number on the government's consumer price index, core inflation, which excludes volatile food and energy prices, appears to be tame. Still, skeptics point to gold prices, which have soared above $500 an ounce this year, as an indication that inflation is brewing.

Crude oil futures at $60 a barrel remains another headache for investors. Mendelsohn pointed out that oil prices above $35 a barrel portended a recession in the 1970s, the 1980s, the 1990s and early in this decade.

"The way the Fed overcame that this time around was that they added so much liquidity to the system as oil prices rose, they sort of delayed any recession by using monetary policy to overcome the drag of high oil prices," Mendelsohn said. "Now, we're at a critical focal point, because oil is at $60, but the Fed is clamping back on liquidity, so you need one of two things to happen. You either need oil to come down to compensate, or you need the next Fed chairman, Ben Bernanke, to step on the gas pedal as the economy slows to reaccelerate it by bringing rates down again."

In fact, one sure way to lower oil prices would be for the U.S. to cut back on consumption, slowing down its economy. That would, in turn, slow down China, Japan and Europe, all of which depend on U.S. consumption as a driver, lowering the demand for oil.

"There's a fairly decent probability that the U.S. economy is going to slow down radically over the next 12 to 18 months, if not go into a recession," Mendelsohn said.

Another factor bolstering that argument is the so-called inverted yield curve. Just last week, the yield on the benchmark 10-year Treasury note dipped below that of the two-year note. Yields on shorter-maturity debt are usually lower. Some believe the situation is a harbinger of recession because it crimps lending margins.

Economists, including Fed chairman Alan Greenspan, have offered a variety of reasons why the inverted yield curve does not signal a recession now. Many traders view the inversion as a sign that the Fed has overshot on its 13-month campaign of raising short-term interest rates. Earlier in 2005, Greenspan referred to long-term rates' unwillingness to rise with their short-term counterparts as a "conundrum."

When the Fed last hiked its overnight lending rate by a quarter-point in mid-December, the market focused on a change in language in its policy statement that seemed like a hint for Wall Street that the end of rate-tightening was near. It dropped its previous reference to "policy accommodation," signaling that the new fed funds target of 4.25% is no longer low enough to spur economic growth by itself.

On Tuesday, the Fed will release the minutes from its December meeting, and investors will scour them for a sign that the Fed plans to pause after another quarter-point rate hike in January.

"I would expect to see something in the minutes that signals that January is the end," Mendelsohn said. "The yield curve is telling them that. Bernanke will get a chance to sit back and watch what happens in the economy."

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