The Dow broke through 14,000 yesterday and has hit record highs 52 times since October.
Two factors were flagged recently as part of the explanation for this remarkable resilience in the US economy and capital markets, despite the gloom surrounding property, hedge fund implosions and a host of other problems:
- There have been more LLCs set up in the past five years than at any time in history, and they account for millions of high-paying jobs. Here’s the remarkable thing: these knowledge workers are not counted as employed. Why? we have no idea. But clearly there are thousands upon thousands of small businesses generating wealth, spending and jobs, who are simply not on the official records. In other words, the headline unemployment rate includes these individuals, apparently.
- Another factor is that the wealthiest 20% of Americans account for 40% of consumer spending. Two dollars of spending for every dollar other Americans spend, and this segment has been growing at a 5% rate.
Other factors include: the economic impact of legal and illegal immigrants; the spending of the 12 million-plus non-documented workers; the fact that the median age of Americans is 34, compared to over 40 in Europe and over 45 in Japan; the 50% reduction in oil per GDP; and of course arguably the major factor which is continued relative low interest rates.
