Does the rising stock market and improving unemployment numbers support Obama’s economic solutions?

It may appear so, but I remain skeptical for several reasons.

The stock market is rebounding off of the low of a year ago, which was largely oversold. The stock market may also be responding to a sharp increase in liquidity. There was almost 3 trillion dollars in money market funds earning a pittance in interest . The further away we get from the economic storm of 2008 the more likely investors will be to test the waters to get a better return.

Stocks seems a natural place to put that cash because it is so liquid. Once can liquidate with the push of a button on E-trade.  Real estate which is still depressed and business investment in expansion and equipment is very illiquid and unattractive in an environment of such political uncertainty.

Ironically in this sense, the political actions harming small business (higher taxes, cap & trade, card check, health care) may actually be serving to stimulate the sale of public securities, but this is not sustainable.

The shock to the system in 2008 and 2009 caused many companies to cut costs dramatically. I have never seen so many companies reduce salaries across the board.  With any rebound in business they will return to profitability very quickly. This would happen without any government stimulation, as it did in the stock crash of 1987.

I still believe it was necessary for the government and the Fed to bail out financial system, though I also largely blame them for getting the system into a position that required a bailout.

This rebound in securities may partially explain the improvement in employment. Even after accounting for substantial increase in government employment and the temporary bump from  census workers there is still a real gain. Yet the unemployment rate remains very high.  It is still conceivable that we will see an uptick in unemployment or more likely a very long slow drawdown from an economy burdened with political baggage, high taxes, and more regulation.

Warren Buffet noted that a weak economy can still support a rising stock market.  Productivity, employment, and growth are the signs of a strengthening economy.  It may be too soon to determine if the economic stimulus will counteract the political actions that are detrimental to job creation and a strong economy.