Wall Street is cheering while Main Street stays mired in a listless recovery
. Maybe this makes sense to Barack Obama and the Fed, but try explaining it to the unemployed.
Friday was another one of those alternate-universe days on Wall Street. The Bureau of Labor Statistics came out with April job numbers that are only so-so, but the stock market greeted the news with another big rally.
All this over a BLS report showing payrolls rising 166,000 in April, barely enough to absorb the natural increase in the labor force. True, unemployment edged down from 7.6% to 7.5%, and the March and February job totals were revised upward (by 114,000 for the two months combined). But none of this resembles the robust growth normally seen at this point in a recovery
The share of working-age Americans with jobs — 58.6% — has barely budged since the bottom of the recession, and we're still some 2 million jobs short of pre-recession levels
. This is unique in post-World War II history. At this point in every other recovery, the job losses had long since been erased. On average, payrolls were 7.6 million above the pre-recession peak.
This is a serious problem at the grass roots, among job seekers and businesses that need a fully employed, well-paid middle class to fuel demand for their products and services. Main Street, in short.
Right now the stock market is riding a valuation wave generated by corporate earnings and monetary easing by the Federal Reserve. Profits can rise without much job creation — in fact, cutting jobs is one way to boost the bottom line when sales growth is sluggish.
And the Fed is, if anything, job-contrarian. It has announced it will stop easing once unemployment falls to 6.5%. When that happens, stocks will start losing the crutch of ultralow interest rates that are putting competing investments, such as bonds and CDs, at such a disadvantage.
From the stock market's point of view, Friday's report was just the right level of mediocrity. It showed the economy wasn't tanking, so companies can still make good money. And it showed the job market wasn't likely to cross the Fed's red line soon.