The Dow Jones industrial crossed 14,253.77 its highest ever point and back from the dismal depths of the recession on March 9, 2009 when it had touched 6,547. Investors and particularly large investors seem to be feeling upbeat about the stock market and things do seem cheery from a macro level. The optimism driving the record high stock market includes the following factors:
- The low interest rates from the Fed have helped.
- The housing market has improved by about 10% and sales of new homes rose by 15.6%. Sales of new homes encourage a whole lot of spending on appliances, furniture and home goods.
- Companies have become more efficient, more global and more technology oriented. The worldwide recession has got all organizations trying to do more with less. This includes a) Using technology and the Internet (including "cloud computing") as much as possible (b) Outsource goods and services globally if the total cost is lower (c) find and develop lower end of the market in the US and global emerging markets. This time the lower end offerings in the US Market finds huge numbers in growth markets like China, India so it is becoming possible to truly globalize at the market end.
- The Stock market seems to ignore the problems of the Federal budget sequester. The market believes that companies will find a way despite political gridlock.
On this rather cheerful day a sad note is that unemployment in the US is at 12.3 million and 47 million are on food stamps. When will the US economy and jobs recover? Or the other way around- when will US jobs and the economy recover – for without jobs and income, consumer spending remains subdued.
This paradox of the stock market zooming while the economy and jobs stagnate is hard to understand. Here are some thoughts:
- Companies will hire people in the later part of 2013 and 2014. Unemployment should reduce but these are for folks with skills that are needed in the new economy.
- Old jobs like in traditional manufacturing that are outsourced are not coming back. Same with technology jobs that can be outsourced, are not coming back as well.
- Folks displaced from the workforce during the recession can try and find skills for the US jobs of tomorrow ( e.g. healthcare) or be willing to move to manufacturing type trade skill work in the housing industry. For new houses do need plumbers, electricians and cable TV installers and this segment cannot be outsourced.
Thus, some challenges for older workers unable to re-train and younger workers who might have training that is not very relevant for the new economy. All this provided housing continues to recover and investments continue in US infrastructure to accommodate skilled manufacturing workers and the right skilled workforce becomes available. Contact StratoServe.