With the stock market hitting new all-time highs, bolstered by the Bureau of Labor Statistics report on Friday that the economy added 236,000 new job in February which brought the unemployment rate down to 7.7%, politicians who had nothing to do with it are claiming credit.
Austan Goolsbee, who had little to cheer about during his brief 10-month stint as Chairman of Obama’s Council of Economic Advisors, tweeted “Woot! Woot!” at the news. Mark Zandi, chief economist at Moody’s Analytics, said the economy’s revival was due to policies that he, as a Keynesian, has been promoting for years: “”My view is that aggressive monetary and fiscal policy response to the recovery has been a net positive.”
There was at least one comment that any recovery had little to do with Washington’s policies. Mark Vitner, an economist at Wells Fargo, said that it is the result of individual citizens doing the best they can under difficult circumstances: “It’s remarkable that in the face of so much political uncertainty we’ve been able to see the growth that we have.”
Mark Hulbert put a much different face on the news from Wall Street, asking what’s the big deal? All that it means is that investors have made nothing – zero, zip, nada – on their equities for five and a half years, while enjoying all of the market risk. If you calculate where the Dow would have to be to equal its high set back in 2007 – 14,164 on October 9th – on an inflation-adjusted basis, the Dow won’t equal the high reached in 2007 until it touches 15,630, or 1,233 points above Friday’s close. And that calculation uses the government’s CPI which many fault for being too conservative.
Even assuming that the Dow fairly represents the economy as a whole, a dubious assumption at best, investors in equities still have a long way to go just to break even.
It’s just a little early to be breaking out the champagne and brie, especially by those promoting policies that had the most to do with causing the Great Recession in the first place.