Wall Street has been on a hot streak for the past few weeks, but those positive numbers are still in stark contrast to the stubbornly high national unemployment rate and sluggish economic growth.
The Dow Jones Industrial was up over 14,500 as trading began Monday, part of a steady increase dating back to Feb. 25 when trading opened at just over 13,784. The 10-day run was the longest winning streak for the U.S. stock market in 17 years.
Compare that number the 7.9 percent national unemployment rate and an anemic growth rate of just 1.6 percent. To give some level of comparison, Utah’s 3.2 percent economic growth is nearly twice the national rate with an unemployment rate now down to 5.4 percent.
So why isn’t a boom on Wall Street translating into better times on Main Street?
Darin Mellott, a senior analyst at CBRE and a member of the Utah Economic Council, joined KSL Today Monday morning and he says there are a variety of elements that can influence the stock market.
“Generally speaking, businesses are doing well,” says Mellott. “They’ve done a good job of keeping their costs low so any improvement in the economy can make a real difference when it comes to profitability.”
Because the businesses that make up the Dow Jones Industrial average do business outside the U.S., they are growing even when the U.S. economy isn’t keeping pace.
“When it comes to the Dow, we have to remember these are multinational corporations,” says Mellott. “They’re doing business in places where the economy is doing much better than it is here in the United States, although things are improving here. That’s a key ingredient to get into a better pace of job creation.”
Public policy plays an important role in overall economic performance. The high level of uncertainty coming from budget battles in the nation’s capital affects the way businesses invest their earnings. The Wall Street economy is booming, the Main Street economy is primed for growth but Washington is not doing its part.
Congress and the administration make the rules businesses have to operate by and when businesses are unable to reasonably predict the rules (tax policy, regulation, etc.) they hold onto the money rather than investing in new ideas, buying equipment, expanding and hiring.
“Policy is going to have a big say in economic outcomes and performance,” says Mellott. “There’s no doubt we’re waiting to see the impact of the sequester, the higher taxes that were implemented earlier this year, there are certainly some open questions and some risk to where the Dow is at right now.”