Stats › Bear markets and drawdowns › Unemployment
Bad unemployment news is usually good news for stocks
| State of the cycle | Cumulative stock response |
|---|---|
| Expansions | +0.986% |
| Contractions | -3.385% |
| Difference | -4.371% |
408 months from February 1948 to December 1995, of which only 57 were contractions. The difference is significant at the 95% level. Source: McQueen and Roley, reproduced in Boyd, Hu and Jagannathan, NBER working paper 8092.
An unemployment print carries two messages at once: lower interest rates ahead and lower earnings ahead. In expansions the rates message wins, so rising unemployment lifted stocks 0.986%; in contractions it cost them 3.385%. The sign depends on the cycle.
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