JEFFREY BROWN:What about just filling in a little bit more on the housing sector? Because those numbers came out yesterday. They looked good. They were interpreted as very positive. But I note that even Robert Shiller himself sort of suggested that he can't read all that much into them. How important is that sector?

JOEL NAROFF: Yes.

Well, to me I think housing is critically important, not simply because of home construction, which obviously powers an awful lot of jobs. But when you consider all the people who have been underwater for so long, and they have this negative wealth effect, we have talked about the fact that 401(k)s are going up. If they see the house prices going up, they feel an awful lot better as well.

And so I think this strength in the housing prices are really the most important factor out there, and it's spread really across the country, not quite as strong as what's going on in some of the areas that collapsed, like Phoenix or Las Vegas. But really any price increase that we're seeing, 3 percent, 4 percent, 5 percent, in areas brings more and more people above water, they feel better, they can start making the moves they wanted to do, and that helps the economy.

JEFFREY BROWN:You know, Roben Farzad, we started this conversation with talk about the defense cuts hitting the GDP in the last quarter. We now face the possibility, real possibility, of more defense cuts and very big domestic cuts. That's clearly a factor in anybody's thinking for forecasting the economy going forward, I assume.

ROBEN FARZAD: That's true.

And, Jeff, frankly, I have stopped calling it the fiscal cliff. It got so tired. I'm calling it the budgetary butte, with your permission.

JEFFREY BROWN:OK.

ROBEN FARZAD: It just—it became so cliche into that final quarter of the year. And you saw the market largely shrugged it off.

JEFFREY BROWN:It's more picturesque. A butte is more picturesque, I think, than a cliff, but go ahead, yes.

ROBEN FARZAD: Yes, indeed.

So I feel that investors at least are not bothered about this. They see this as a game of chicken going up and down Pennsylvania between the White House and Congress. And much of this has been kicked down the road effectively for a couple of months. We do know that we have an unsustainable budget deficit situation.

But on the flip side of that, you have economists like Paul Krugman out there saying do not worry about the budget deficit, this is not the time to be slashing public spending. As you saw, that actually helped push that economy into decline in the final quarter. That was a big variable in that. So this is a huge debate.

But, on balance, what you're seeing is a lot of the unexpected has surprised to the positive. You mentioned housing. Housing is not just virtuous in that it helps homeowners and construction workers out there and material suppliers. It's also helping the banking sector, which, after all, gorged itself on these terrible mortgages back in 2007 and 2008, and it thought that it had to just write those off forever.

So manufacturing is surprising to the upside. Suddenly, Detroit is resurgent. Suddenly, you're reading more about people who want to set up factories here in the United States because labor is becoming more expensive in the developing world.

So this economy has really demonstrated an ability to surprise to the upside. And now the big question is, does this recourse back into employment? Do you see the hundreds of thousands of people who have to be hired every month to sustainably cut into this unemployment rate?

JEFFREY BROWN:All right, Roben Farzad and Joel Naroff, thank you both very much.

JOEL NAROFF: Thank you.

ROBEN FARZAD:Thank you.