Business news sources are exuberant because the Dow Jones Industrial Average (DJIA) has hit an all–time high. They should know better writes Jacob Goldstein:

• Any economist worth their salt knows that you need to take into account inflation adjusted changes in indices over time.
• If you do that with the latest DJIA numbers then the Dow is currently below its highs in 2000 and 2007. It’d have to rise another 10% to set the record for all-time best.
• But even if it did it wouldn’t mean much. The DJIA has several weaknesses which make it a really bad economic indicator. (Centives has previously covered some of those reasons here).
• Other, more useful stock indices such as the S&P 500, are below their highs in both nominal and inflation adjusted terms.

Read more about the weaknesses of the DJIA and more over here.

Source: NPR