Over the past five years, the United States economy has been on the mend. So why is there still a pervasive sense that we’re stuck in the mud?

Perhaps it’s because our economy has expanded at a 2.2%-to-2.4% rate in each of the past three years. That seems downright anemic compared to economic growth rates seen in prior decades.

Yet every spring, economists sing the same refrain: “This is the year we’ll finally reach 3% GDP growth, and the economic recovery will finally feel real.”

This year began with a similar refrain. According to a Wall Street Journal survey conducted in January, economists looked into their crystal balls and once again predicted a 3% economic growth rate this year. (That article suggested that the economy grew 2.6% last year, but that figure has been subsequently ratcheted down to 2.4%.)

“The plunge in energy prices provides big dividends to consumers and businesses,” said Bernard Baumohl, chief global economist of the Economic Outlook Group to the WSJ at the time.

Here’s the problem: any sort of oil-related dividend is nowhere to be found. Consider this recent sampling of economic data points:

— Revolving credit (which mostly reflects credit card debt) fell at a 5% annualized rate in February. That’s been a recent monthly pattern. Consumers are clearly not spending any savings from the gas pump.

— Employers added far fewer jobs in March than expected. And thanks to downward revisions for January and February, the economy produced fewer than 200,000 new jobs per month thus far in 2015. That compares to 269,000 jobs created, on average, per month in 2014. And we still only saw 2.4% GDP growth last year, even with such robust job figures.

At this point, it’s unclear if the economy is simply being impacted by a cold winter in the Eastern United States, or if this is the start of a prolonged slowdown. It’s a crucial question because the answer will mean the difference between 2% and 3% GDP growth this year.

#-ad_banner-#Why should you care about such a distinction? Because 2% GDP growth likely means most companies will struggle to boost sales and net profits. At some point, perhaps sooner rather than later, investors may finally connect the dots between a mid-to-upper teens market price-to-earnings ratio and minimal profit growth.

Yet 3% growth is a completely different story. If executives see GDP growth is trending back up toward the 3% mark in the second and third quarters, then they’ll be inspired to start hiring anew, giving the entire economy the fuel it needs to rev up. Investors would respond in kind, looking ahead to what sales and profits would look like in a year or two for companies that benefit from a more robust economy.

At that pace of economic growth, corporate sales (in economically-sensitive industries) would likely rise closer to 10%. Why would 3% GDP growth have such a powerful effect? Because stronger demand will not only lead to higher unit sales, but companies will have more leeway to raise prices. That combination can yield a 10% total revenue increase fairly quickly.

William Dudley, president of the Federal Reserve Bank of New York recently summarized what many CEOs may be pondering right now. He thinks the recent spate of subpar economic data may be partially weather-related. “However, it will be important to monitor developments to determine whether the softness in the March labor market foreshadows a more substantial slowing in the labor market than I currently anticipate.”

Risks To Consider: As an upside risk, a resurgent Europe could start to lift the prospects for U.S. multinationals. In a similar vein, if China can get past its current rough patch, key emerging market customers may also feel inclined to start ordering American-made capital equipment again.

Action To Take –> It might be easy to conclude that stocks can power higher even if the economy grows well below 3%. After all, slow economic growth hasn’t hampered the market in recent years. But much of the market’s gains were fueled by exogenous factors such as the U.S. Federal Reserve’s massive stimulus efforts. Those stimulus efforts are now over, which may explain why the economy getting into a higher gear. I still remain troubled by the flattening yield curve.

The yield on 10-Year U.S. Treasuries remains below 2%, which is often a sign of underlying economic weakness. I would feel a lot better about stocks if the yield were on its way to 2.5% or 3%. That would be a tacit signal that the economic spirits are indeed gathering force.

As you keep one eye on earnings season, you’ll need to keep another eye on the U.S. economy. In addition to weekly jobless claims (released every Thursday), investors will also want to take a close look at the Chicago Fed National Activity Index (April 20), the PMI manufacturing index (April 23), durable goods orders (April 24) and the Consumer Confidence index (April 27).  

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