WASHINGTON The Dow roared to a record Tuesday. Yet the markets run-up feels worlds away from the lives of many Americans.
Wages have only recently started to recover after months of declines that stretched family budgets thin. Unemployment is stuck near 8 percent, high enough that most Americans still know people who are out of work. Signs of a housing recovery have boosted stocks, yet millions of people face foreclosure.
Here are three reasons why many Americans dont share Wall Streets cork-popping mood:
Fewer people have money invested in the stock market, so many missed out on the rally.
Americans sold more stocks than they bought for a fifth consecutive year in 2012, despite unprecedented efforts by the Federal Reserve to artificially juice the market and encourage investment. Americans have sold hundreds of billions of dollars worth of stock the first time on record thats happened during a sustained bull market. The market rise has been powered by big investors such as pension funds.
The flight from stock markets has coincided with a series of confidence-rattling stumbles: last years botched initial public offerings by Facebook and BATS Global Markets; the 2010 flash crash that sent the Dow plunging 600 points in five minutes; unprecedented volatility related to European and U.S. fiscal policy debates.
No pay raises
Wages are stagnant, and incomes are shrinking.
The weak job market is limiting pay. With so many applicants to choose from, employers need not compete for workers by boosting salaries.
Hourly wages increased 2.1 percent last year, barely enough to keep up with inflation. Median household incomes fell 4.8 percent between June 2009 and June 2012, after adjusting for inflation, according to a report by Sentier Research, which crunches census and other government data.
The Social Security tax break is no more.
Nearly 80 percent of working Americans are taking home less pay this year because of a tax hike that took effect Jan. 1. The last-minute tax deal between Congress and President Barack Obama to extend some lower tax rates failed to renew a reduction in Social Security payroll taxes. As a result, the rate increased this year to 6.2 percent from 4.2 percent.
The extra 2 percent will cost someone making $50,000 about $1,000 a year, and a household with two high-paid workers up to $4,500.
Smaller paychecks make it difficult to feel included in Wall Streets exuberance.