JUDY WOODRUFF: With less than a week left before the first presidential debate, both candidates remained focused today on persuading voters they can boost the economy.

But a key question at the heart of it all, is the economy slowing, stalling, or perhaps even gaining strength in some ways? New data are sending conflicting signs.

Republican presidential nominee Mitt Romney campaigned today at a military academy in Pennsylvania. Romney promised better jobs for young people like the cadets sitting behind him and a better future for the entire country.

MITT ROMNEY (R): We're in a very different road than what I think the people of the world expected for the United States of America. And if I'm elected president of this country, I will get us back on a road of growth and prosperity and strength.

(CHEERING AND APPLAUSE)

JUDY WOODRUFF: Today, at a campaign event in Washington, President Obama shared a message of what he called economic patriotism tied to a strong middle class.

PRESIDENT BARACK OBAMA: But our problems can be solved. Our challenges can be met. We have still got the workers in the world, the best universities, the best scientists, the best—we got the best stuff.

(LAUGHTER)

BARACK OBAMA: We just got to bring it together.

JUDY WOODRUFF: Consumer confidence is higher of late, and the president may be getting a boost from voter attitudes.

An NBC News/Wall Street Journal poll out last week found 42 percent of Americans think the economy will improve in the next year. That's six points higher than a month ago; 18 percent say the economy will worsen, and almost a third expect it to stay the same.

The Obama campaign is also pointing to some revised job numbers to make its case. The U.S. Bureau of Labor Statistics said yesterday there were nearly 400,000 more jobs created in the previous year that ended in March. That would mean that there are a higher number of jobs than when President Obama took office.

But the U.S. still has four million fewer jobs since before the collapse of the financial sector. There's other sobering data as well, showing a still sluggish recovery. The Commerce Department revised its estimate of second-quarter economic growth down yesterday from 1.7 percent.

Mitt Romney seized on the change in Springfield, Va.

MITT ROMNEY: We are at 1.3 percent. This is—this is unacceptable.

JUDY WOODRUFF: Other economic indicators also paint a mixed picture.

The stock market itself, while down today, has been climbing in recent weeks, to its highest levels in nearly five years.

Today, the Dow Jones industrial average lost almost 49 points after a weak manufacturing report and worries over Europe, to close just over 13,437.

And the housing market may be stabilizing. A key index showed home prices rose in July to the highest level in almost two years, pointing to a recovery there.

Consumer spending was also up last month, but it was largely to pay for higher gasoline prices.

For a closer look at all this with two people who follow these things closely, we turn to Kenneth Rogoff, a professor of economics and public policy at Harvard University, and co-author of "This Time, It's Different: Eight Centuries of Financial Folly."

And Mohamed El-Erian, CEO of PIMCO, a global investment management firm, one of world's largest investors.

Gentlemen, thank you, to both of you, for being with us.

Mohamed El-Erian, let me start with you. There is so much information coming in, but it's not all pointing in the same direction. How do you see the strength of the economy?

MOHAMED EL-ERIAN, PIMCO: So, Judy, you're right. It's mixed information. If you were to bring it all together, we believe it points to a really sluggish economy.

By that, we mean growth of 1 percent. And there are both external and internal reasons for that. Externally, the headwinds are considerable. China is slowing. Europe is still in a debt crisis.

Internally, we are still dealing with the legacy of the financial crisis. We have had basically no policy-making out of Congress now for a long time.

And to make things even worse, the healthy parts of the economy, and there are quite a few, the healthy parts are not engaging because they're waiting to see how the fiscal cliff and other things are going to work out, so sluggish economy with the risk of stalled speed.

JUDY WOODRUFF: So, Ken Rogoff, is sluggish the main word you would use?

KENNETH ROGOFF, Harvard University: I think Mohamed El-Erian gave a pretty good description of what's going on.

I do think next year might look a little better. But I don't think we're going to be having fast growth for a very long time. The uncertainty around the world, in Europe, in the United States, in China is one thing.

The huge debt legacy from the financial crisis is another and the growing government debt.

That said, I mean, I wouldn't underestimate the upside, with the U.S. being such a creative economy. For example, energy prices have fallen a lot. And there are some other things you can point to on the upside.

But, so far, businesses have been very reluctant to invest heavily, very reluctant to hire heavily.

JUDY WOODRUFF: Mohamed El-Erian, what do you see—when you look at all this data coming in, what is most important to you?

MOHAMED A. EL-ERIAN: A few things, first, the employment picture, and not just whether we're creating jobs or not—that's important—but also what's happening to those who remain unemployed.

And that is a pretty worrisome picture. That's why I call it a crisis, because long-term unemployment is really high and youth unemployment is really high. And these are longer-term issues that we need to deal with. So the employment picture is very important.

Second, clarity for businesses. Today, no—and do they have the confidence to invest? There is a ton of money, Judy, on the sideline, a ton of money. And if we can engage that money into the system, it will be great.

And then, third, as Ken rightly said, the global economy. We are facing severe headwinds. So a number of things to look at, and, as President Obama said in the report, if we manage to get—bring things together, this economy can sprint. But it requires quite a bit of political work to bring things together.

JUDY WOODRUFF: We will pick up on that, Ken Rogoff. What would it take? And I'm curious about what you see that makes you think things could get better next year.

KENNETH ROGOFF: Well, this is just a very creative economy. And it's easier, especially for us economists, to see what can go wrong than to think of these out-of-the-box things, technology, the way globalization works, that can go right.

Certainly, though, there is still—the housing is a problem. It's been stabilizing. I think that's been one of the good things, but there are still a lot of mortgages underwater. Consumer confidence is up, but I wouldn't count on it being so good that it's going to be getting us to 4 percent growth, to where we're feeling really good.

What I would like to see? Well, first of all, I would like to see tax reform in a way that keeps rates reasonable—I don't know if they can be lowered—and gets rid of deductions.

I would like to see spending on infrastructure that really is going to help us grow. I would like to see improvements in education.

Policy has been stalled for an extended period and a changing world. And we need to catch up. We have to prepare not just for having next year be good, but the next 10 years, the next 20 years.

JUDY WOODRUFF: Mohamed El-Erian, you talked a—you spoke a minute ago about the money that's sitting on the sidelines. And I hear Ken Rogoff referring to that, too.

What is it going to take that shake that loose, to make people feel more confident, to make business owners feel that it's a good thing to invest?

MOHAMED A. EL-ERIAN: It's going to take what Ken said. And, critically, it's about a number of items that have to be addressed simultaneously.

You know, we like this notion maybe there's a shortcut, maybe there is a killer app, maybe there is this one thing. Well, there isn't.

It's taken us years to get into this mess. It's going to take us years to get out.

And we only get out through simultaneous progress on a number of areas. So, Ken spoke to fiscal reform. He spoke to infrastructure. He spoke to education.

I would add labor retraining and retooling. And I would also add fixing the credit pipes of this economy. So it's a long list. It requires simultaneous progress. And the longer we wait, Judy, the harder it gets.

JUDY WOODRUFF: And to end on a negative question, I guess, Ken Rogoff, what would prevent all of those things from happening?

KENNETH ROGOFF: Boy. Well, gridlock in Washington.

We could have no budget still in January. That's not going to be good for investment.

Europe has temporarily stabilized, but it looks pretty shaky if you are standing in Spain or Greece. The Chinese economy is not only slowing, it's in a political transition that no one knows how it's going to play out. The Middle East.

Like I said, Judy, there are lots of things we can think of that can go wrong. But I do think there is a balance because it is a very creative economy. There are also things that can go right.

JUDY WOODRUFF: So, just finally to both of you, Mohamed El-Erian, as you put all this together, and you look at the beginning of 2013, 2014, what do you see?

MOHAMED A. EL-ERIAN: So, the first thing is, I tell the politicians, please remove the fiscal cliff, because if the fiscal cliff occurs, and we get 4 percent of GDP disorderly cuts in spending and then across-the-board increase in taxes, the U.S. will go into recession.

So, the first thing is, do no harm.

Second is, if we can get over that, I see an economy gradually picking up momentum. It's not going to be great. We're going to—we're going to create jobs, not enough to really lower the unemployment issue. And, hopefully, we're going to start dealing with these longer-term issues.

So, like Ken, the thing I find most frustrating, Judy, is this is not a complicated issue. We can handle this. We can unleash the innovation, the entrepreneurship, the cash that is on the sideline. But it requires a political will and political coordination.

JUDY WOODRUFF: Ken Rogoff, quick last word.

KENNETH ROGOFF: Well, I mean, I think that the thing that confuses people is, we're not going to go off the fiscal cliff, but what direction are we going to go?

There's such different visions coming from the Republicans and the Democrats. Frankly, I think if either were to win decisively, it would be better off than having no policy. But we don't know what direction we're going. I think that is really what the issue is.

JUDY WOODRUFF: Well, on that question mark note, we will end it.

Ken Rogoff, Mohamed El-Erian, we thank you both.

KENNETH ROGOFF: Thank you.