Booming Stocks, Stronger Economy

Jan 28, 2013 9:07am

Morning Business Memo…

You can open your eyes now. A look at most 401K statements will bring welcome news. The benchmark for many big stock mutual funds – the S&P 500 index – is on its longest winning streak since 2004. The S&P opens for business today above 1500 for the first time since the recession started in late 2007. The Dow Jones index is up 6 percent since Jan. 1. Corporate earnings from Procter & Gamble and Starbucks were the latest sparks for a rally, but the strong start to the new year has another more important cause: increasing confidence about the improvement in the jobs market and housing.

Economists are increasingly optimistic about growth in the year ahead . A quarterly survey by the National Association for Business Economics released today shows half of more than 60 economists who were questioned now predict growth will be between 2 and 4 percent this year. That’s up from 36 percent of respondents who felt the same way three months earlier. “The labor market is really gaining momentum. There was very positive news looking ahead there,” says Tom Gill, director of economics at the National Electrical Manufacturers Association. “We’re seeing slow but steady progress on a lot of fronts.” He expects sales at many companies to rise this year. “We’ve seen wage and salary gains pick up in the fourth quarter, which is a positive for consumer spending going forward.”

The housing recovery is a big part of this positive feedback loop. The Wall Street Journal reports gains in sales of home air conditioners, heating equipment and power tools. Honeywell, United Technologies and Oshkosh are among the companies with higher sales of housing and construction equipment.

The boom in online retailing continues to hit brick and mortar stores. Barnes & Noble is the latest example. It’s top store executive likely says the chain is likely to close up to a third of its stores over the next decade. The rise of e-books has been a blow to many bookstores.

Five years of high unemployment has taken a big toll on young workers entering the labor market. A new study from the non-profit Center for College Affordability and Productivity says nearly half of Americans with college degrees are in jobs for which they’re overqualified. But the findings are controversial. Richard Vedder, an Ohio University economist and founder of the center, has long argued that too many people go to college. Despite his findings the unemployment rate for college graduates is far lower than rates for those who don’t have a degree.

Toyota is once again the world’s top automaker, dethroning General Motors. Toyota’s final global sales for 2012 were 9.748 million vehicles. GM sold 9.29 million cars and trucks. Toyota recovered after production was disrupted by the earthquake and tsunami in 2011. GM had been the top-selling automaker for more than seven decades before losing the title to Toyota in 2008.

Richard Davies Business Correspondent ABC NEWS Radio ABCNews.com twitter.com/daviesabc

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