Economists still disavow
The hope that those wishin'
To find a position
Will likely be getting one now.
The stock market's rate of return
Is based on what companies earn.
As long as it's more,
On the stock exchange floor,
Employment's of little concern.
The Dow Jones Industrial Average reached a new high yesterday, ignoring continued low growth and policy paralysis in the US. The Dow closed at 14,254, passing its previous high of 14,164.52 in October 2007. The stock market's remarkable recovery, in the face of a tepid comeback in the real economy, appears to reflect both a surge in US corporate profits and the Fed's quantitative easing programs, which have lowered the rates of return on "safe" investments such as bonds, and thus driven investors into riskier assets such as stocks.
As shown in the graphic at right, the market's recovery is also not good news for the job market, which is stuck at around 8% unemployment, and has not regained the mid-level-wage jobs lost in the mini-depression. It is on the high and low ends of the wage scale that any rehiring is occurring. There is an unpleasant, but inescapable sense in which the bad employment figures have actually contributed to, rather than detracted from corporate profits. Companies have been able to achieve higher productivity with fewer workers, and the high unemployment rate has held down wages, i.e., labor cost.