(For previous posts in this series, see here.)
The current weird situation in which the stock market rises on what you or I might think is bad news can also be seen with labor figures. When reports are released that unemployment is low (which ordinary people would think is a good thing), the stock market tanks. When unemployment figures rise, the stock market also rises. Why? We are told that if unemployment is low, that means that workers are in demand and thus have more clout in negotiations and their wages are likely to rise. Again, you and I might think it is a good thing for working people to be earning more. But for investors, this is bad because rising wages means lower profits for companies and an increased possibility of rising prices, which means the possibility of inflation, which means that the Federal Reserve might raise interest rates to reduce the money supply and thus lower the risk of inflation. And we know the love affair that investors have with low interest rates. Hence the stock market goes down.
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