Regional reports. On assignment for WORLD, I’ve been in Tennessee, Colorado, and Arizona this week. I flew into Phoenix, the largest city in the state, and it’s experiencing a solid recovery. Housing prices are up 25 percent from the depths of the recession. The economy is growing at an annual rate of 2.9 percent, well above the national average. And, of course, this week in particular, it’s been busy because of the NASCAR Sprint Cup race last weekend, baseball spring training, and the seasonal migration of snowbirds. (Memo to those buried by this week’s blizzard: It hit 84 in Phoenix this week.) Hotels and rental cars are booked, and demand has driven prices to premium levels. But is it that way in the rest of the country? Not so much. The Federal Reserve released what it calls its beige book this week, which is a region-by-region report on how the economy is doing. Overall, the U.S. economy is “expanding modestly,” the report said, but some regions are definitely doing better than others.
Market boom. “Expanding modestly” is definitely not how I would describe the growth in the stock market lately. The Dow Jones Industrial Average closed at a record high on Tuesday—then broke that record on Wednesday, Thursday, and Friday. But Kenneth Polcari of O’Neill Securities is among many who say stocks have climbed from the bottom because of the Fed’s monetary policy, a policy that has left few viable investment options outside equities. But it’s hard to argue with success. In 2013, the Dow has gained 9 percent … so far.
Market crash? So do artificially low interest rates mean we have artificially high stock prices? Those who say no argue that stocks are still fairly inexpensive. Price-to-earnings ratios are still about 10 percent lower than they were at the peak of the bull market in 2008. But those who say yes are quick to point out that we know in retrospect that the 2008 market was in fact a bubble market. The Wharton School’s Jeremy Seigel famously said last year that the Dow would hit 17,000 in 2013. I interviewed him a few months ago and he said he stands by his prediction.
Job outlook improving. The number of Americans seeking unemployment aid fell for the first time to a seasonally adjusted 340,000 last week, driving down the four-week average to its lowest level in five years, and that’s a level that most economists say will produce sustained growth. Mark Zandi, the chief economist of Moody’s Analytics, said it’s a solid report. “At the current pace, this should be enough to start bringing down unemployment,” he said on Thursday. As if to prove his point, the Labor Department reported on Friday that the economy added more than 236,000 jobs and the unemployment rate fell to 7.7 percent. That was better than expected, but it had little impact on the stock market Friday, since a strong number was already baked into the price.