If we look at the US economy presently through the eye of the DOW Jones index we might be tempted to say that we are heading into a year of high growth, due to breaking record of over 14,500 points. Years of previous record Dow Jones’ high such as the boom that led to the crisis, experienced one of the largest period of growth in US history where unemployment was low, and Treasury bill rates were high due to investors being confident enough to invest in corporate bonds and equity. But is this present period of record highs similar? Would you feel the economy was back to expansion if the Dow Jones wasn’t posting record highs? Are we really back? The answer is no.
If we look at the economic boom of the 90s, according to the US Bureau of Labor Statistics unemployment rate was down below 4% before the dotcom bubble burst, and it was around 4.5% before the 2008 financial crisis. Nonetheless with the Dow at record highs, present unemployment rate is at 7.7%: a rate higher than after the dotcom bubble burst. 
Another statistics that is important to highlight according to The New York Times is that wages in 1975 represented 50% of GDP and for the years after the financial crisis of 2008 only 43.5%; an event that would usually occur during recessions when consumer confidence is down and consumers, investors, and businesses are hesitant to spend. Wage stagnation can also lead to further problems of income inequality and underemployment of highly skilled workers.
Going internationally, we are currently seeing the European Crisis further contracting; Portugal just reported a contraction of 3.3% on its second quarter; Spain reported over 25% unemployment (over 50% for the lost generation youth); Italy has seen its borrowing costs increase with the increased risk amid its elections.
China according to the Shanghai Daily will not be able to maintain 8% GDP growth as it slows down due to lack of demand from major players like the EU and the US.
Japan has seen the value of the yen depreciate on the previous months which is a good sign for an export oriented country when it comes to export competitiveness and subsequent currency repatriation, but the Japanese Central Bank has recently reported its concerns over inflation and a raise in interest rates which has slowed the yen’s depreciating rate. Analysts believe the change in the value of the yen was predominantly due to Abe’s election and rhetoric towards the Japanese central bank to perform further easing.
All of these events make the Dow’s record high seem an oxymoron with the present state of the global economy. Analysts believe that this growth is artificial carried by the Federal Reserve with its asset purchasing program and quantitative easing. The Fed minutes have gone as far as to allude we are amid another bubble, and that it will rupture if the Fed relinquishes on intervening in the economy leading to a vacuum of demand…*gasp* Let’s just hope we are really back.
By: Luis Alfonzo Chacin
Are you suggesting is not a good time to invest? Do you think current Venezuelan problems might arouse a series of minor investments on the US that might alter these percentages? Or as far as economy goes, we may not even move a decimal on these percentage statistics that might wake up The US government into reacting to this problem? At least it might create more jobs sending a few troops down the Equater. It may ameliorate unemployment’s down rate, and help our nation.