The economy continues to flounder with few signs of improvement in unemployment. Unemployment remains entirely too high with few prospects of decline any time soon. Housing remains in near depression as would-be buyers cannot sell their current homes or they worry about losing their jobs, or they cannot find financing. Manufacturing continues to grow, but much slower than earlier in the year, and not fast enough to create jobs. But there are at least two bright spots, (not counting the growing possibility of a gridlocked Congress forced to compromise). The consumer appears to be increasing his outlays for goods and services and the stock market continues to recover from 2008. 

September’s gain of 8.92% (total return) for the S&P 500 index represented the largest increase for the month since 1936. The most widely used gauge of value, the price/earnings ratio shows stocks are still reasonably valued at 12.5 times projected earnings for the next 12 months. Projections are for earnings to grow 36% this year and 15% next. In the past two weeks individuals’ confidence in stocks has risen the most since March 2009, according to the American Association of Individual Investors. The March 2009 rise in sentiment preceded an 82% rise in stock values which peaked most recently in April of this year.

Political strategist James Carville won the election for Bill Clinton when he turned the campaign’s focus toward the economy to unseat President George H. W. Bush who was considered unbeatable because of his successful foreign policy. An article in the Capital Journal Section of today’s Wall Street Journal by Gerald Seib sums up the problem facing not only the Democratic party this election cycle but the economy in general. “Fact One: The unemployment rate is the most important of all leading political indicators. Fact Two: If the August unemployment number to be announced Friday tops 9% [it increased from 9.5% to 9.6% last month] the jobless rate will have been above that level for 16 straight months. Already, the U.S. is mired in the longest such stretch of 9%-plus joblessness in more than a quarter of a century.”