18 major economic indicators that have not recovered as Dow hits new record

Real GDP growth began to fall after the U.S. removed the dollar from the gold standard in 1971, but a major drop-off took place between the times of the last stock market high in 2007, and the new one in 2013.  At the time of the Dow reaching 14154 just six years ago, GDP growth was at 2.5%, and unemployment was below 5%.As of the last quarter for 2012, GDP growth has falled to 1.6%, at the same time the Dow touches a new record high.  Validating that equities markets are not based on corporate expectations and fundamental growth, but on Federal Reserve monetary easing, and little risk from opposing traders.In 2008 at the height of the housing bubble, oil reached a record high of $145 per barrel, and gasoline prices would eventually touch $4.10 around the country.  But as the economy began to slow, and the Dow reached its last record high leading into the Great Recession, gasoline prices on that day were just $2.75 on average.Six years later, the Dow has fully recovered to a new all-time high, and on March 5, average gasoline prices are now at $3.73 per gallon, even though oil prices are just $90.57 per barrel, and consumption is down more than 20% since 2008.In 2007 at the height of the housing bubble, the Dow Jones Industrial Average reached an all-time high of 14164.5 before falling more than 50% in 2009.  Since the Federal Reserve instituted a new monetary policy change, created to print tens of trillions of dollars to pump into stocks, banks, and other equity markets, and to ensure market forces push the Dow only upwards, in just four short years, the Dow has reached a new high, recovering everything lost during the time of the Great Recession.View the list »
Dow Jones hits new all-time high

Stock Market newsletter

On March 5, the Dow Jones Industrial Average (Dow) reached a milestone by setting a new record high, and fully recovering all losses that occurred after the bursting of the housing bubble, and during the period of the Great Recession. Opening trading above the old high of 14164.5, the Dow is one of the very few economic sectors that has improved since 2007, with 18 other major indicators still showing the economy is much worse off than just six years ago, when the Dow had reached its previous record high.

Related topics

Advertisement

To achieve this new stock market high, the Federal Reserve has had to sacrifice its primary missions of job creation, and keeping down inflation, which have both increased since the central bank began monetary easing policies that centered upon propping up the stock markets, and channeling money away from business growth and economic production.

In creating the facade of a vibrant economy through the Fed's boosting of the Dow to its new high, it is vitally important to pay attention to the other portions of the economy that can not only affect investments over the long term, but can also mean the difference in regards to job opportunities, price inflation, and most American's ability to have a meaningful quality of life.

View the list
  • In 2007 at the height of the housing bubble, the Dow Jones Industrial Average reached an all-time high of 14164.5 before falling more than 50% in 2009.  Since the Federal Reserve instituted a new monetary policy change, created to print tens of trillions of dollars to pump into stocks, banks, and other equity markets, and to ensure market forces push the Dow only upwards, in just four short years, the Dow has reached a new high, recovering everything lost during the time of the Great Recession.
  • In 2008 at the height of the housing bubble, oil reached a record high of $145 per barrel, and gasoline prices would eventually touch $4.10 around the country.  But as the economy began to slow, and the Dow reached its last record high leading into the Great Recession, gasoline prices on that day were just $2.75 on average.Six years later, the Dow has fully recovered to a new all-time high, and on March 5, average gasoline prices are now at $3.73 per gallon, even though oil prices are just $90.57 per barrel, and consumption is down more than 20% since 2008.
  • Real GDP growth began to fall after the U.S. removed the dollar from the gold standard in 1971, but a major drop-off took place between the times of the last stock market high in 2007, and the new one in 2013.  At the time of the Dow reaching 14154 just six years ago, GDP growth was at 2.5%, and unemployment was below 5%.As of the last quarter for 2012, GDP growth has falled to 1.6%, at the same time the Dow touches a new record high.  Validating that equities markets are not based on corporate expectations and fundamental growth, but on Federal Reserve monetary easing, and little risk from opposing traders.
  • For the majority of Americans, jobs are one of the top demands in the economy. Not only the opportunity to find a well paying job, but the ability to move from vocation to vocation, or location to location as their needs change.When the housing bubble burst, and the Great Recession entered the economy, job layoffs occurred at a near record pace.  And since the height of the last Dow record in 2007, almost seven million workers have been unable to find jobs, as economic growth has not mirrored equity market recovery.
  • With a lack of job recovery, the natural consequence is a rise in food stamp applications and recipients.  And in the time since the last stock market high on the Dow in 2007, Americans on food stamps have risen by over 20 million.
  • The question as to the how and where money has become available to bring the Dow to an all-time record high is answered by this single economic indicator.  As the Federal Reserve has made it a point to provide years of Zero Interest Rate policies (ZIRP), and increased their balance sheet by 400%, this additional money has been used primarily to ensure stock markets rise and overwhelm any resistance that might come from investors seeking to short or oppose the Fed's market agenda.As seen by the chart, when the Fed began massively increasing their balance sheet in 2010, the stock markets rose from below 10000, to a new high in 2013.
  • There is no indicator in the economy that can validate or invalidate the economic policies of an Administration than US debt vs GDP.  During the Great Depression, President Roosevelt was criticized on both sides for spending too much, and not spending enough to stimulate the economy into growth.However, the amount of money the government has borrowed since 2008, and especially under the Obama administration, compared to a falling GDP, which registered a -.1 for the last quarter of 2012, proves that the US economy is now past the point of diminishing returns for money printing and dollar infusion to create economic growth.
  • Who could have imagined that in just six years, the budget deficit would rise from less than $100 billion, to an estimated $1.05 trillion dollars in 2013.  This is what is facing the American people, and an economy that just spent the past month debating the merits of cutting $85 billion from the budget.Along with the rise in national debt, the rise in annual budget deficit is proving to have diminishing returns in what it creates in the form of jobs, economic growth, and holding back inflation.
  • Through the first month of 2013, the national debt has risen nearly $400 billion to $16.8 trillion, and is a staggering 1.05 times the total GDP for the country.  The rise in the national debt since the last time the Dow reached a record high is nearly $8 trillion, and in that time, unemployment has more than doubled, and GDP growth, along with revenues, have fallen dramatically.
  • While household and consumer debt began a trend downward starting in later 2010, the transition from credit card debt to student loan debts threaten to change the cycle back up.  At the time of the last Dow high in 2007, consumers held massive debt from mortgages, lines of credit, and credit cards.  With several million foreclosures taking place in the past four years, coupled with a doubling of bankruptcy filings, the sentiment to borrow money again for consumers is proving very enticing, even as the equity markets rise from the ashes against all opposition to the contrary.
  • As we noted in a previous indicator the rise in the number of people still looking for work, and even more disturbing trend has taken place since the credit crash, and bursting of the housing bubble.  More people than ever are simply staying out of the labor force, and have given up, or are not being recorded, as people able to work.
  • Consumer sentiment is the economic indicator that shows how confident the public is in the economy, and how much they emotionally feel the direction the economy is going for the future.  Since 2007, consumer confidence has fallen more than 33%, and this is a major indication why the Federal Reserve has chosen to prop up the stock market over business growth.  People see the stock market results more than any other indicator, and it is a strong catalyst for whether people feel an economy is improving, or declining.
  • In 2011, Standard and Poors (S&P) downgraded the U.S. for the first time in history, dropping their rating from AAA to AA+.  This is not only an indication about how much the dollar is being devalued by excess printing and debt borrowing, but how trustworthy the U.S. is to countries around the world in trade and their purchasing of dollar denominated debt (treasuries).
  • The VIX is a market indicator denoting the risk level of equities and markets, primarily on the S&P 500, in regards to the expected volatility of stocks over the next 30 days.  Known also as the fear index, the rate of confidence in markets not declining at the time of a new Dow high shows that investors do not believe the Fed will end market manipulation anytime soon.
  • Since the Federal Reserve dropped interest rates to near zero after the credit crisis of 2007, returns from the bond markets, especially U.S. treasuries, have fallen over 60%.  The bell weather bond in the governments arsenal, the 10-year treasury note, is a leading indicator that the symbiotic relationship between the Fed's bond buying, and their continuing influx of money printing, will continue on for the foreseeable future.Which also indicates that the stock market may go much higher since the Fed's policy of buying $85 billion in assets each month is currently indefinite.
  • An interesting thing took place after the credit crisis struck in 2007.  The Federal Reserve funneled trillion of dollars to European banks, and the ECB, to stave off economic disaster in the Euro Zone.  However, even as Fed intervention in foreign banks and markets took place in unprecedented volume, the old adage of rising tides float all boats did not occur, and even as the U.S. markets recovered to new record highs, Europe is still embroiled in major recession, and on the verge of losing many EU nations as they chose to devalue their currencies, and enter into a currency war.
  • In 2012, gold prices soared to an all-time high of $1950 per ounce, as investors feared Fed intervention and low interest rates would usher in massive inflation.  Yet even as these fears have been allayed since the Dow last hit 14000, gold prices have remained over their 100% gains, as investors who look more at commodities and currencies, trust these assets more than equity markets built on bad fundamentals.
  • The answer to why the Dow suddenly achieved a new record high on March 5 can intrinsically be found by the fact that stock volume on the NYSE is less than half of what it was in 2007 when it achieved its previous record high.  With less than 50% of the volume being traded each day, fewer investors are actually in the stock markets, and coupled with the Federal Reserves policy of pushing billion of dollars into the stock markets, the only direction the Dow can go with these volumes is up.
View the list
Suggested by the author:

, Finance Examiner

As a historian in his primary field of study, and an investor in the real world, Kenneth has a keen perspective on all facets of the financial world. He has owned his own business and corporation, and has been an investor in many different markets such as securities, real estate, currency trading...

Advertisement

Today's top buzz...