Media Struggles To Reconcile Dow Surge With Unemployment

Hey, kids! Did you get the funny feeling in the past 48 hours that the legal tender in your wallet felt a little more bald-eagley? There's a reason for that! Yesterday, the Dow briefly hit the magical 10,000 mark, and has been sniffing around that milestone for the better part of the day. We're back, baby!

And yet, wasn't it weird that those good feelings didn't prompt you to go out and spend that hard currency in reckless abandon? There's a reason for that, too. You don't have a job! So, when we say, "We're back, baby," the standard "supplies are limited, some restrictions apply, void where prohibited" disclaimer should be assumed to be in effect.

It's been fun watching the media grapple with the Dow Up/Employment Down phenomenon, though, as various anchors eye the statistics and quizzically wonder, "How'd that happen?" Well, U.S. News and World Report's Rick Newman has a simple explanation: the Dow's surge is, in essence, a juked statistic:

So are job losses good for the stock market? Actually, yes. At least for awhile. Stocks are rising because many companies are earning more money than analysts have expected. But earnings aren't up because companies are selling more stuff; most companies are still selling less stuff and grappling with falling revenue. Instead, earnings are rising because companies have cut their costs more than revenues have fallen. And "costs" are often the same as "jobs."

Newman pulls some earnings reports highlights from companies like Johnson and Johnson, Pepsi, and Alcoa, and finds the same pattern: revenue down, earnings up. And there's the rub:

All of those companies have laid off workers over the last two years, probably necessary to keep the company healthy. And it's worth keeping in mind that when earnings outperform revenue, it's a sign that the company is well-run (assuming there's no Enron-style hocus-pocus). But CEOs also know that you can't grow a company or keep juicing the stock price by cutting costs and slashing jobs. Real growth only comes from new customers, new business, and increased revenue. And on that measure, the outlook is murky for the stock and job markets both.

The same workers who have been getting laid off, improving the cost profile for many companies, are also consumers running out of money to spend. Some are going bankrupt, defaulting on bank loans, and losing their homes. That's a major risk to corporate profits--and stock prices--down the road.

Meanwhile, over at Fox News, Neil Cavuto has an issue! "What was once the Bush recession is now the Bush recovery... or is that a stretch?"

WATCH:

Is it a "stretch" to call this the "Bush recovery?" Not at all! Just don't forget to include the word "jobless!"

RELATED:
Why Stocks Are Surging as Jobs Disappear [U.S. News And World Report]
Fox News Talks Up 'Bush Recovery' [Washington Independent]

PREVIOUSLY, on the HUFFINGTON POST:
Dow Hits 10,000, Unemployment Nears 10 Percent

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Comments

[Bjarni]

Watching only the Dow is tricky, you don't get the whole story.

The Dow is Priced in dollars, and when the strength dollar goes down you need more of them to cover the entire market.

When Zimbabwe's currency was weakened greatly with the massive inflation they experianced, their stock market skyrocketed.

When our economic collapse happened, and alot of value was eliminated, our currency got alot stronger and with that caused our stock market to drop further down than it otherwise would have.

But when the stock market is valued in anything other than dollars, such as silver, copper or other assets, the climb hasn't been all that dramatic.

[WorkingClass]

The "recovery" is a fraud. Perception management is the responsibility of the corporate media. While reconciling the recovery meme with the reality of increasing joblessness, default and homelessness, the corporate media have made "lagging indicator" a household word.

[Winston120]

It's not that unemployment is a "lagging indicator" which is 100% propoganda and even the POTUS speaks this nonsense.

If you look at the top performers this earning season: GOOGLE, IBM, Intel, Goldman, JP Morgan:
these are all multi-national companies. They have downsized to align with a USA that might have 20% unemployment for a long, long time. The difference is more than made up by China, Brasil, India.

This whole mess started in the 70's. Bush accelerated it for sure, Obama took the handoff nicely, as the President of Goldman Sachs.

[InofTouch]

you label media as awhole but you gave one example...a rather easy example

[Jacksonian]

I'd like to suggest an alternative headline: "Media Struggles to Find Ass with Both Hands," which is a paraphrase of my first news director's favorite expression.

[Tags]

The stock market isn't an indicator of economic strength.

The stock market is an indicator of investor optimism that the risk of buying stock in heavily leveraged companies is outweighed by the "can't-miss" short term profits sure to follow.

The hard part is figuring out when the high water mark is reached.

[ksmith111]

Congress need to extend unemployment for another 13 or 20 weeks. We are unemployed not dead! The money flows back into the economy one way or another,at the least it will give the economist a feather in their cap to produce a positive report on consumer spending. It's Holiday Season!!!

[Stock market]

I haven't seen anything being done. Where's the infrastructure projects,the green energy, the needed repairs,the projects to bring us into the 21st century?

But the War continues with no bang for the buck and all while Congress natters away endlessly.

hat tip to: http://bit.ly/1NkbAn

A person making 60,000 pays 20,000 of it in various taxes. A person making a million or more has a tax rate of 30% compared to 90% decades ago.

[land2341]

Lagging is quite different from the record breaking gap between the wealthy and the poor in this country.

The gap is larger now than it was last October and that gap had people alarmed. The economy collapsed. The poor got poorer - they lost their jobs.

The rich got slightly poorer - for a while - but then hey the peasants can keep getting laid off so we make earnings look good.

This is unsustainable. This is a fool's rally. Profit from it while you can but don't bet the house on it.

[Susan Robertson]

This is 'leading' vs 'lagging.' The stock market is a leading indicator and unemployment is a lagging indicator. Unemployment, historically, is the last indicator to show improvement in any recession, while the stock market is typically the first.

[ibsteve2u]

lollll...Kramer is on CNBC right now talking about how he sympathized with the poor people of the world back when he was poor, himself....

Guy cannot even hear what he says: Now that he is wealthy, it is quite alright if others get wealthy by making the many poor.

[Stock market]

This lopsidedness of the economy, stock market defiles logic.

hat tip to; http://bit.ly/1NkbAn

l

[ibsteve2u]

Ain't nothing like international earnings - the isolation of "big money" from the well-being of the American people and the nation itself - to make the Dow look rosy.

And throw in the big banks squeezing the consumer for the difference between the 0% the Fed charges them and the 19%+ they charge?

lollll....Rosy, indeed - even if that hue itself is ultimately derived from Americans bleeding economically as they watch the death of the American dream unfold before their eyes.