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Editorial: Stock market recovers, but economy has long way to go

Mar. 10, 2013 @ 10:45 PM

Much was made last week about the Dow Jones industrial average eclipsing its previous high from 2007, which was just shortly before the nation's economy went south into the Great Recession.

For investors who stuck with their stock portfolios during the years that followed, the stock market's recovery is good news. Many investors lost as much as 40 percent of their savings after the stock market started tumbling in late 2007, and now those who stayed in the market may have regained much of what they lost.

However, not all is well, and it's clear that the full rebound in the stock market is not reflected throughout the economy and in all of the nation's households. While many companies' bottom lines are once again healthy, many households' financial circumstances are far from rosy.

Yes, the housing market, at the center of starting the Great Recession, has gradually improved. But many families are still feeling the pain because housing values haven't fully recovered. Many families' financial stability is tied to their home's value. This is particularly true of middle-class folks, who also aren't in a position to invest as heavily in the stock market. Eighty percent of all stocks are held by the wealthiest 10 percent of households.

Likewise, the economic recovery has been unlike most others in the past because unemployment remains relatively high. Companies, many making more use of technology, have learned to do as much or more with fewer employees. While the Dow is back to where it was before the recession, the unemployment rate today -- 7.9 percent -- is far higher than the 4.7 percent of 2007.

One positive aspect of the recent stock market surge is that investors apparently are not paying much attention to the recently imposed federal budget cuts. Many people were worried that the lack of action to avert the cuts by the Obama administration and Congress could send the economy into another tailspin. Those concerns were overblown, it appears now, although some effects may be felt in the months ahead if nothing is done.

But one has to wonder just how long the economy can shrug off the ineptitude in Washington. Perpetual bickering between Democrats and Republicans is doing nothing to solve the nation's problems. In addition, an unknown game plan from government leads to uncertainty for business, and that can restrain economic growth.

Last week, there were some positive signs out of Washington that perhaps leaders will do more than point fingers at each other from a distance. Obama, whose lack of direct talk with Republican leaders was glaring prior to the start of the federal budget cuts, has moved to start a dialogue. The president plans to go to Capitol Hill to meet separately with Senate Republicans and House Republicans.

If the nation's leaders could actually work together and chart a course for the nation's short-term future, perhaps businesses would be more included to hire. All those who remain unemployed and still feeling the financial strain would no doubt view that as a welcome change.



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