Top Leaderboard, Site wide
Shop the Truthdig Gift Guide 2014
December 22, 2014
Truthdig: Drilling Beneath the Headlines
Sign up for Truthdig's Email NewsletterLike Truthdig on FacebookFollow Truthdig on TwitterSubscribe to Truthdig's RSS Feed

Get Truthdig's headlines in your inbox!


The War to Start All Wars
In 2008 Mumbai Attacks, Piles of Spy Data, but an Uncompleted Puzzle






Truthdig Bazaar
Hitch-22: A Memoir

Hitch-22: A Memoir

By Christopher Hitchens
$16.19

more items

 
Report

Why the Lousy Jobs Report Boosted Wall Street

Email this item Email    Print this item Print    Share this item... Share

Posted on Feb 10, 2014

By Robert Reich

pacogaitero (CC BY-NC-SA 2.0)

This post originally ran on Robert Reich’s Web page.

The stock market surged Friday after the lousy jobs report. The Dow soared 160 points, while the S&P 500, and Nasdaq also rose.

How can bad news on Main Street (only 113,000 jobs were created in January, on top of a meager 74,000 in December) cause good news on Wall Street?

Because investors assume:

Advertisement

Square, Site wide
(1) The Fed will now continue to keep interest rates low. Yes, it has announced its intention of tapering off its so-called “quantitative easing” by buying fewer long-term bonds in the months ahead. But it will likely slow down the tapering. Instead of going down to $55 billion a month of bond-buying by April, it will stay at around $60 billion to $70 billion.

(2) The slowdown in the Fed’s tapering will continue to make buying shares of stock a better deal than buying bonds – thereby pushing investors toward the stock market.

(3) Continued low interest rates will also continue to make it profitable for big investors (including corporations) to borrow money to buy back their own shares of stock, thereby pushing up their values. Apple and other companies that used to spend their spare cash and whatever they could borrow on new inventions are now focusing on short-term stock performance.

(4) With the job situation so poor, most workers will be so desperate to keep their jobs, or land one, that they will work for even less. This will keep profits high, make balance sheets look good, fuel higher stock prices.

But what’s bad for Main Street and good for Wall Street in the short term is bad for both in the long term. The American economy is at a crawl. Median household incomes are dropping. The American middle class doesn’t have the purchasing power to keep the economy going. And as companies focus ever more on short-term share prices at the expense of long-term growth, we’re in for years of sluggish performance.

When, if ever, will Wall Street learn?


New and Improved Comments

If you have trouble leaving a comment, review this help page. Still having problems? Let us know. If you find yourself moderated, take a moment to review our comment policy.

 
Monsters of Our Own Creation? Get tickets for this Truthdig discussion of America's role in the Middle East.
Right 1, Site wide - BlogAds Premium
 
Right Skyscraper, Site Wide
Right 2, Site wide - Blogads
 
Join the Liberal Blog Advertising Network
 
 
 

A Progressive Journal of News and Opinion   Zuade Kaufman, Publisher   Robert Scheer, Editor-in-Chief
© 2014 Truthdig, LLC. All rights reserved.

Like Truthdig on Facebook