Surprising news on the U.S. economy arrived Thursday from Pacific Investment Management Co., or Pimco, which manages the biggest bond fund in the world.

The firm’s two star managers, Bill Gross and Mohammad El-Erian, have been a couple of the leading grouses about the prospects for the U.S. economy for two years, coining the term “the new normal” to explain their view of a slow-growth environment. Bond guys love misery, so they always used the phrase with a smirkish smile.

Given the intellectual and emotional investment they had put into that view, you can understand what a shock it was when El-Erian today announced that Pimco had boosted its expectation for GDP growth in the United States in the next year to 3% to 3.5%. The firm’s previous range was 2% to 2.5%, and the estimate published by the International Monetary Fund is 2.2%.

I have been telling you that the Obama tax changes would lead to a boost in GDP estimates, so this is right on time.

Here is what El-Erian told Bloomberg: ”The U.S. is using fiscal and monetary policy to try to attain escape velocity for the economy. What we don’t know yet is whether that will be enough not just to change the economy’s trajectory for one year but to place it on a medium-term sustainable path.”

El-Erian said the upgrade had come about after Pimco analysts had assessed the “massive” impact of the government’s “increasingly unconventional” strategies . Those include the purchase of $600 billion worth of Treasurys by the Fed and $120 billion to $300 billion of tax cuts (depending on what passes) in the White House budget compromise with Congress.

Now mind you, an economy running at 3% to 3.5% is still nothing to write home about, since 4% is the long-term trend and 2.5% is the minimum required to support job growth. But it is so much more optimistic than the previous estimate, from a credible source, that it really got noticed.

The 3% is what I have suggested would be most likely, but for the majority of institutional fund management desks around the world it is a big change in outlook. It’s a big positive.

Personally I have decided to stop forecasting economic reports such as monthly payrolls since the market just doesn’t seem to care if they are up or down on any given month so long as the trend remains mostly positive.

I prefer to take my cues on the economy from the Weekly Leading Index of the Economic Cycle Research Institute, which I have shown you regularly for years. It up-shifted to -2.4% from -3.3% last week, which is a big jump. It is still negative, but headed in the right direction.

We already know that unemployment is weak and is likely to remain in the doldrums for months, if not the next three years. That is why the Federal Reserve is providing so much monetary support, and why the government has decided to extending the Bush-era tax cuts and add an investment tax credit. So to the extent that employment remains weak, the central bank continues to try to stimulate business growth by keeping interest rates at 300-year lows.

And remember that the longer unemployment remains subdued, the more companies increase productivity. That means they make more in income per unit of labor. So in a twisted way, although we grieve as citizens for our friends and family members who cannot find work, as investors we see the potential for higher fourth-quarter earnings among companies that are able to make the appropriate adjustments in their business models.

Now we have a situation in which this rise of prices in the face of weak economic news has stunned the bears. Their thinking was that the raid on Irish credit after the EU bailout would have had the same effect on equities as their post-bailout raid on Greece. That was the May to June wipeout, in case you have forgotten. And if that didn’t do it, bears were counting on a bad jobs report to scatter prices to the wind.

Instead, investors have decided that European, Japanese and U.S. banking authorities are on top of the situation better this time. They may not have a permanent fix, but it’s good enough for now.

As a result, bears were set back on their heels at the start of last week and remained on the run for most of the next five sessions. If the bulls can keep the S&P 500 above the 1,200 level for one more week, bears will cover more of their shorts and the benchmark index will have a clear path toward 1,300 and beyond. Stay tuned; this could be epic.

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