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The economy is looking increasingly dicey for 2010.

Oh, things are okay now. The most recent numbers are, in fact reassuring. The United States seems to be on track for something like 3% economic growth in the fourth quarter. That would be a slight acceleration from the 2.8% growth (as revised) in the third quarter. And would put the economy on track for the kind of decent but not great recovery in 2010 that most investors and economists are expecting.

But recent numbers suggest that instead of accelerating off that fourth quarter 3% growth, the economy might be headed for a slowdown in 2010. Not all the way back to negative numbers, the numbers say so far, but definitely a deceleration at a time when just about every stock is priced for acceleration in corporate revenue and earnings.

There’s nothing certain in these numbers. And I’m sure some of you will add them up differently. But let me give you the evidence as I see it that growth rather than picking up is going to start sputtering in 2010.

So far the numbers look pretty good for the fourth quarter.

Manufacturing continues to expand, according to the Institute for Supply Management (ISM) survey. Yes, manufacturing activity dipped to a reading of 53.6 in the survey for November. That was down from 55.7 in October and lower than the 55.0 consensus of economists. But remember that anything above 50 shows that the manufacturing sector is expanding. November marked the fourth consecutive month that the index came in above 50.

November auto industry sales also strengthened. Industry-wide sales in the United States climbed to an annual rate of 11 million units in the month. That’s up from an annual rate of 10.5 million in October and 9.2 million in September. On November 5 I wrote “October is the first month since December 2008 to see the annualized rate of sales top 10 million units–without the push of a government subsidy.” (See my post ) And now November has come in at an 11 million annual rate—again without subsidies. In the month General Motors (GM) reported that sales ran 6.3% above November 2008. Ford (F) was flat with November 2008 but picked up market share for the 13th time in the last 14 months. (Chrysler Group was the big loser with sales down 25% from November 2008.)

There were even promising signs out of the residential real estate sector. In October numbers released on the first day of December, the National Association of Realtor’s Pending Home Sales Index climbed 3.7% from October 2008. The index measures the number of contracts for purchase signed in that month.

If the data looks that good for November, why am I worried about 2010?

First, because anecdotal evidence, which while often being less reliable than official surveys but which runs ahead of the official surveys, shows signs that the economic stimulus from last February is a) wearing off sooner than expected in some sectors of the economy, and b) was indeed, as some of us worried at the time, too small to stop unemployment from rising above 10%.

In the construction industry, for example, anecdotal evidence gathered by the Wall Street Journal strongly suggests that highway construction companies have just about completed the small projects funded by the February stimulus package. Even with the stimulus work, unemployment in the construction industry had climbed to 19.1% in October 2009 from 10.7% in October 2008. In the transportation and material-moving sector unemployment stood at 11.6% in October, up from 7.9% in October 2008.

The stimulus bill provided only $28 billion (out of $787 billion) to highway construction. And while stimulus money for bigger projects is still working its way into the economy, this $28 billion was largely spent on smaller, “shovel-ready” work that has just about been completed.

A recently completed survey by the Associated General Contractors of America found that 44%of contractors expect to lay off workers this year.

The hope was that the stimulus package would be enough to get the economy back on a self-sustaining growth path. Hasn’t happened yet. At least in this sector.

Second, because deeper analysis of some of the positive data from November reveals just how hesitant the recovery is.

Take a deeper look at the ISM survey, for example. There’s no sign yet that manufacturers are willing to bet on the economic recovery and build products before they have orders. An analysis by shows production falling slight, even as manufacturing continued to expand, in response to a drop in new orders in October. Orders picked up again in November but the production numbers didn’t.  I’d expect to see the production numbers climb again in December in response to that increase in orders.

This manufacturing to orders is also reflected in inventory numbers that show that no one is willing to build inventories in anticipation of future orders and sales. When orders fall, manufacturers cut production rather than keeping machines running and building inventory.

While it is a big positive that manufacturing is expanding, these numbers show that confidence is still extremely fragile.

Which wouldn’t concern me so much except for that, third, the economy will get a big kick in the teeth in 2010 from state budget cuts. In my November 10 post I wrote that estimates for state budget shortfalls at the state level come to $145 billion to $178 billion in the fiscal year that ends in June 2010. Budget gaps like that, on top of already drastic cuts in spending in 2008 and 2009, will produce massive cut backs in state spending on everything from road and school construction to police and firemen, teachers, and state park workers. The same survey that showed 44% of contractors anticipating that they would lay off workers in 2010 also showed that 76% expect state transportation departments to put less work out for bid in 2010 than in 2009.

Budget cuts run down hill.

This week the Obama administration is holding a jobs summit. But I don’t expect anything of substance to come out of it—or at least nothing that would require new spending. The economy may need a second stimulus package—I think the need is absolutely clear—but the political mood has shifted so that, with elections looming in November 2010, I don’t expect any politician to recommend anything more expensive than an extension of unemployment benefits and maybe-just maybe—a transfer of some unspent bailout money to transportation spending or something like the home weatherization program that’s been dubbed Cash for Caulkers.

So what do you, as an investor do now?

In my October 14 post on how to worry and when ( ) I said that I thought it would take until we had disappointing first quarter GDP numbers in April or so before the fundamentals of this economy started to take a bite out of stocks. That still seems about right.

That gives you plenty of time to reduce the risk in your portfolio. But the time to take these steps is now when the market is still climbing. They get a lot harder to execute when stocks are falling. Then the inclination is to hold on in the hope that you can ride out the turmoil.

I think you ride the current rally—based as it is on a falling U.S. dollar and not on economic fundamentals—for another couple of months. But very, very carefully. It’s time to think about taking profits by selling partial positions. Or by selling all of your position in a stock has gone from rising gradually to rising like a rocket.

If you know how to use stop loss orders to protect yourself in a downturn, this is a good time to make sure you’ve either placed formal stop orders with your broker or set imaginary stop losses limits that trigger a sell order from you if a stock falls to your stop price.

It’s a good time to make sure that your portfolio isn’t more volatile than you’d like. Fortunately, big cap, relatively low volatility stocks have been in favor lately. That makes it easier to sell a stock high Beta stock and buy a McDonald’s (MCD) or a PepsiCo (PEP).

(If you have questions about what any of these terms mean or the details of any of these strategies, ask in the comment section to this article on my blog JubakPicks.Com. I’ll try to fill in the details—if some reader doesn’t bat me to it.)

I don’t think you have to sell everything or rush to the exit immediately. We’re not looking at the end of the world. A falling dollar will continue to support stocks for a while yet. And even if my fears come true, I don’t think we’re looking at a double dip that takes us back into a recession.

I just think that growth is going to be disappointing—if still positive–in 2010. And that’s something that isn’t built in stock prices that have rallied since March.