May 17, 2022

Economic Enigma – High Unemployment, Low Incomes and Record Stock Prices

The stock market has been in recovery mode since early 2009 with stock prices more than doubling as the Dow Jones surges past 14,000.

Chart forDow Jones Industrial Average (^DJI)

Americans have regained a substantial portion of the wealth that vanished during the initial years of the financial crisis.  A good portion of the increase of household net worth was based on a surging stock market.  Since 2009, household net worth has increased by $14 trillion or over 26%.

Despite the broad recovery in stock prices, the wealth effect has not been spread very wide since the top 10% of households control 93% of all financial assets.  Rising stock prices have been of little benefit for the average worker who has a minimal investment in stocks.

FRED Graph

The Federal Reserve policy of easy money and zero interest rates has ramped up asset prices for the wealthy but very little of that wealth has trickled down to the average worker.  Real disposable income today is lower than it was in 2008 and unemployment remains at historically high levels.   Until the economy can produce more jobs with higher pay, soaring stock prices remain irrelevant to the average American worker.

FRED Graph

Graph of Civilian Unemployment Rate

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