Hurray! It's the week of Thanksgiving! A time when many Americans fight – er, hang out – with family, eat too much food, and reflect on what they have to be thankful for in their lives. This Thanksgiving seems especially sweet because news of unemployment, housing, the fiscal cliff, and the stock market have all seen progress. So is this a cause for celebration, or should we freeze our leftovers for the coming apocalypse?
As of October 2012, the seasonally adjusted unemployment rate dipped below 8% to hover right at 7.9%. Considering that it was at 10% in October of 2009, that's a great improvement. So, is this a lasting change? There are two major obstacles to unemployment on the horizon: the end of the Bush era tax breaks, and the fiscal cliff – not so affectionately called sequestration.
While many see the ending of Bush's tax breaks for the wealthy to be a positive step in tackling U.S. debt, there are many who argue that if taxes are increased on the wealthy, it'll negatively affect unemployment. House Speaker John Boehner has specifically said that he believes tax increases "will destroy jobs in America."
Whether tax increases on the wealthy will negatively impact unemployment remains to be seen. But it is certain that if Republicans and Democrats can't agree on tax reform, avoiding sequestration seems almost impossible – and that will most certainly negatively impact unemployment.
Speaking of sequestration
The good news on sequestration is that on Friday, President Obama and House Speaker Boehner appeared to be working on compromises. This news, undoubtedly, was in part responsible for the Monday morning stock market rally – the Dow Jones Industrial Average rose 207.65 points, the S&P 500 rose 27.01 points, and the NASDAQ Composite rose 62.94 points. It is hoped that this signals that the deeply divided sides are putting aside their bickering for the good of the economy.
Additionally, this news comes as a welcome sign for defense giants such as Boeing (NYSE:BA), Northrop Grumman (NYSE:NOC), and Lockheed Martin (NYSE:LMT). All three companies have urged Congress to avoid sequestration, as further defense spending cuts will deeply hurt their businesses.
Whether a compromise will actually be reached is still unknown, and there are many who are starting to advocate for going over the fiscal cliff as a way of forcing tax increases to take place. But for the sake of America's economy, and its current credit rating, let's hope the yahoos on Capital Hill stop acting like children fighting over their favorite toy, and agree to share. Because let's face it, the economy is improving, but a blow like sequestration is definitely not what we need right now.
Home is where the heart is
Along with an improving economy, the housing market has taken a positive turn. According to the National Association of Realtors, sales of existing homes increased 10.9% in October, compared to a year ago. Moreover, home prices have risen 11.1% compared to a year ago, and inventory fell 1.4% at the end of October.
More great news? The National Association of Homebuilders stated that builders are reporting an increase in demand for new, single-family homes, and that builder confidence is at an all-time high since May of 2006.
That's great news for companies like Lowes Companies (NYSE:LOW), and The Home Depot (NYSE:HD), which depend, in part, on a strong housing market to drive business. Recently, both of these companies announced higher than expected revenue in their latest quarterly earnings.
However, the recovering housing market, like unemployment and the stock market, is dependent on the avoidance of sequestration. If sequestration takes affect, that's 1.4 million jobs lost – or 1.4 million families that are going to have a much harder time paying their mortgages.
What I'm thankful for
There's still a lot of uncertainty regarding the future, but there's also a lot to be thankful for. Unemployment has decreased, both the housing market and the stock market have increased, and there's the beginning of a glimmer of bipartisan cooperation on Capital Hill – maybe they're afraid Santa will bring them coal? So, my Foolish friends, while I wouldn't plan on throwing out your leftovers just yet, it's probably prudent to freeze a leg or two.