Donald Lambro

WASHINGTON - While the Dow Jones industrial average merrily soared to new highs on Wall Street, it was a much more sobering and even depressing story on Main Street America.

Despite the stock market's rapid ascent to record levels, economic analysts were warning that it doesn't reflect the economy's anemic fundamentals and that we may well be entering another bubble that's about to burst.

The Washington Post's business page warned ominously Sunday that the Dow's exuberance, disconnected from any economic reality on the ground, comes with "plenty of caveats."

"But the biggest reason to discount the importance of the stock market reaching a new high is this: It hasn't been matched by a similar increase in the incomes and job prospects of Americans," the Post said.

"The jobless rate is hovering around 8 percent, and the average earnings in the private sector, adjusted for inflation, have barely budged for five years."

This isn't the first time the stock market has triggered a bull rally when the economy was flat and it won't be the last. For now, though, the market is blithely dismissing earlier fears that had kept it in check: the $85 billion, "fiscal cliff" sequester that hasn't lived up to the fear-mongering demagoguery that earned President Obama a bagful of "Pinocchios" from a battery of fact checkers.

Nor are the markets concerned about the March 27 deadline when the stop-gap bill that bankrolls the federal government expires. House Republicans will likely pass an extension through the end of this fiscal year to keep the government open and running, as they prepare for the far more important fiscal 2014 budget-cutting battle to come this spring.

But at some point, the financial markets are going to have to take a much harder look at this economy's shaky fundamentals and face the harsh, stubborn reality of high unemployment, weak job creation, a shrinking work force, declining venture capital investment, looming health care and regulatory costs, flat incomes, and a mushrooming $16 trillion federal debt.

All of this is reflected in mediocre retail sales, declining small business formation and shrinking economic growth that barely budged in the last three months of 2012 by a recession-tilting one tenth of one percent.

The growth forecasts for the rest of this year are in the 2 percent range, though some top business economists say growth may not exceed 1.9 percent.

Donald Lambro

Donald Lambro is chief political correspondent for The Washington Times.