Dow is up, tough times still ahead

October 14, 2009 11:44:18 PM PDT
There was celebration on Wednesday on Wall Street. An important gauge of the economy, the Dow, closed above the 10,000 mark for the first time in a year. It is great news, but tough times still lie ahead.

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The Dow reached 10,000 as a result of improving profits at companies, mostly in the financial sector, helped by massive layoffs that followed across the retail industry and many others.

"There has been recovery in profits on the backs of people who have been let go," says Terry Connelly, the dean at Golden Gate University's Ageno School of Business.

While California's jobless rate is at 12.2 percent, and expected to climb when the latest numbers come out next week, a climbing stock market could benefit workers.

"I think you'll begin to see the first evidence of improvement, not so much in hiring statistics, but in hours worked and perhaps in hiring temporary help and in the decline of furloughs and unpaid leaves," says Connelly.

Sylvia Allegretto, Ph.D., an economist at U.C. Berkeley's Institute for Research on Labor and Employment, predicts a long wait for job recovery.

"The recession of 2001 was over in November of 2001, but we didn't start to create positive job growth well into mid-2003, so if that's the situation we're in, it's going to be a very long time before any numbers on Wall Street translate into jobs on Main Street," says Allegretto.

The state is also deeply mired in foreclosures. A new analysis from RealtyTrac puts California at number three in the nation.

Investment advisers, such as Carlo Panaccione, president of Navigation Group, thinks Wednesday's Dow 10,000 will lure back individual investors who will see a positive sign in a rising market.

"Right now we've got a lot of money on the sidelines. People are going to start feeling a little better," says Panaccione.

The future of the stock market may be in the hands of two major Bay Area companies -- Apple and Google. Both of them will be reporting their earnings in the next few days, one of them a gauge of the consumer electronics field, the other on internet advertising.

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