One Chart Proves The Stock Market Is Pointless In Your Life

This one chart shows that, at the end of the day, the Dow Jones has no meaning on your life, and the economy.

chart Dow Jones Industrial Average Hourly Earnings Corporate Profits

This chart shows the rate of growth for hourly earnings, corporate profits, and the Dow Jones Industrial Average, since the start of the recession.  It does not look pretty.  (Assume that 1Q 2009 is the starting point) 

Today, the stock market hit new highs and milestones.  The Dow Jones Industrial Average hit 16,000 for the first time ever, the Standard & Poor's 500 index hit 1,800 for the first time ever, and the NASDAQ reached 4,000 for the first time since the dot-com bubble burst 13 years ago.  But these numbers, once whimsical numbers that apparently showed the health of the economy, seem so detached from the rest of the world now.  The chart above indicates how detached it is:  While the Dow Jones has recovered magnificently, Americans are gaining little of that recovery in terms of real earnings, as well as jobs.  Even though the stock market is doing well, the rest of us are still in a weak recovery. 

The chart above shows the progress of real wages, corporate profits, and the Dow Jones Industrial Average since the beginning of the recession.  The DJIA hit its low point in the first quarter of 2009, and now has reached more than double its value in the nearly five years since the start of the recession.  Corporate profits after taxes, while not as strong as the DJIA, still have gone up more than 75% since the early days of the recession, and more than 100% if you account for the rock-bottom fourth quarter of 2008.

Average hourly earnings, however, have barely moved at all, going up only 10% over the last five years.  The rate of inflation since the start of the recession has been 10.2%, so in reality earnings have actually fallen to a small degree.  While not charted, the unemployment rate has also been slow to recover: From its peak of 10% in October 2009, the unemployment rate is halfway between that and its lowest point of 4.4% in May 2007 as of this month.  If the current rate of decline continues, it will take eight years to undo the damage of the recession in terms of unemployment, which occurred in a little over two years.

This chart demonstrates the largest problem concerning the economy right now:  While big corporations have recovered greatly and are doing better than ever after the recession, those benefits are not trickling down to regular workers at all.

View Comments

Recommended For You