A symbolic milestone

The American economy is a wonderful engine of prosperity left to its own devices, and on Nov. 24 it proved this again with another surge in equity prices that pushed the Dow Jones Industrial Average above 30,000 for the first time. Stock prices rise and fall, but this symbolic milestone of optimism for the future shows the economy’s resilience despite the COVID-19 plague.

We’ve lost track of the many doom and gloom predictions, especially since politicians shut down the economy in March. Remember the disaster that was supposed to follow the end of enhanced federal jobless benefits on July 31? Didn’t happen. Third quarter growth was 33.1 percent.

Then recall the catastrophe if Congress didn’t pass another $3 trillion spending bill? Chuck Schumer and Nancy Pelosi issued almost daily press releases, echoed by the sages at Bloomberg. Didn’t happen. Then last week we were told that if the Treasury ended the Federal Reserve’s special pandemic facilities, the markets would reel. Some reeling.

Instead the economy keeps growing, and the jobless rate keeps falling, despite the surge in new COVID infections. The Atlanta Fed is estimating growth in the fourth quarter, which is halfway over, at 5.6 percent. That could certainly change if more governors follow California’s Gavin Newsom in punishing his state’s citizens with lockdowns. That’s one reason California’s jobless rate was fifth highest among the 50 states in October at 9.3 percent. New York was third highest at 9.6 percent.

Meantime, overall U.S. growth continues to surprise for the better. The housing market is booming, and consumer and small-business confidence are strong. The unemployment rate is down to 6.9 percent, and continuing jobless claims fell another 429,000 in last week’s report. Americans have enormous savings they can deploy, which explains why consumers keep spending despite the pandemic. Auto sales have been strong, no doubt in part because people are flying less and aren’t taking the usual vacations.

Investors are looking at the medical miracles of COVID vaccines that portend the end of the pandemic in 2021. The fading chance of post-election political trauma helps, but the bigger boost to the market has come from the prospect of a Republican Senate acting as a check on Joe Biden’s destructive tax increases. He can still do damage with regulation, but that takes more time and is subject to legal challenge. The two Georgia runoffs on Jan. 5 producing a Democratic Senate are, apart from shutdowns, the biggest market risk ahead.

By the way, on Election Day in 2016 the Dow closed at 18,332.

* Guest editorial from the Wall Street Journal in New York, N.Y.


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