The U.S. economy may still be sputtering along, but Wall Street is surging.
On Wednesday, the Dow Jones industrial average rose another 48 points, just a day after closing above the 15,000 mark for the first time ever. It's part of a trend that has seen the Dow rise by 15% just since the start of the year. Jonathan Cheng, markets reporter for the Wall Street Journal, says a big part of the market growth is corporate profits. "The big U.S. companies like General Electric, McDonald's, Coca-Cola, they're making more money than they ever have," Cheng tells KTRH.
However, that phenomenon also helps explain why the surge hasn't translated to new jobs. "The reason why corporate profits have been so strong is because hiring hasn't been as robust," he says. "For a lot of companies, the biggest cost is paying people's salaries."
Corporate profits aren't the only factor in the banner numbers for Wall Street, though. Cheng says this boom has received an outside boost from the Federal Reserve and other central banks. "What they've done is they've put a lot of money into the system and a lot of that money ends up in stocks, and that's part of the reason why stocks have done so well," he says. However, that artificial influx of printed money has led some to compare the current surge to a bubble that could burst. "I think both the skeptics and the optimists have it right in some respects," says Cheng. "Yes, the housing market is much better and corporate profits are better, but there is also a strong element of the Fed getting involved as well."
The current apex is part of a four-year climb out of the abyss of the 2008-09 recession, which saw the Dow plunge to a 12-year low of just over 6,500 in March of '09. While Cheng notes that this recovery in the market in that short of time is impressive, the overall economic recovery is still missing one important element--jobs. "Companies are doing well without necessarily the employees doing well," he says. "Of course if you're a shareholder you're doing well, but if you're looking for work this isn't the kind of recovery that you want to see."
Listen to the Wall Street Journal This Morning weekdays at 4 a.m. and hear Wall Street Journal business reports throughout the day on Newsradio 740 KTRH