At first glance, the economy or the stock market might seem to be the last thing anyone would be thankful for. This would be especially true with unemployment remaining high and the stock market down for the year in the United States and doing even worse in most other countries. However, there have been some positive developments throughout the world and even in the U.S.; there are some signs of improvement.
During the last two decades, hundreds of millions of people have been lifted out of poverty in Asia and tens of millions in Latin America have also seen their economic fortunes improve. This has brought about dramatic improvements in life expectancy. From an economic perspective, this has created many new investment opportunities throughout the world. For American companies, this has enhanced profitability even as growth has slowed in the U.S. and Europe. Africa is the final continent that has the potential for significant growth over the next decade.
While the performance of the U.S. economy has been somewhat disappointing in recent years, there has been good productivity growth, which is important because productivity growth ultimately determines our standard of living and quality of life. There has been significant improvements in crop yields per acre and labor hours needed to produce automobiles. Gains have continued to be dramatic in technology and even the notoriously inefficient health care system continues to develop new life-saving drugs and devices.
More recent economic data appears to be somewhat brighter. Last week, leading indicators were reported for October, and it was one of the best readings of the past year. This would imply a somewhat better economy over the next quarter or two. Weekly unemployment claims have been gradually decreasing over the last several months, implying that labor markets should be getting better.
Even in California, state officials are starting to see an increase in employment, despite unemployment remaining well above the national average. The last three months have all registered moderate gains in new jobs. All regions of the state are showing job gains relative to last year, though Northern California, with Silicon Valley is doing better than Los Angeles County.
Excessive government debt will remain an issue both here and in Europe for quite some time. This continues to cause major volatility in the stock market even though recent readings on the U.S. economy have been somewhat better. Eventually, some resolution on deficits should be reached both in the U.S. and in Europe, which will help avoid a repeat of the financial crisis of 2008. There will likely continue to be sufficient growth in emerging markets going forward to continue to drive corporate profits, which ultimately determines stock prices.
