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> In what kind of world does a strong jobs number, implying a strong economy, sink stock prices? > There is a clear dichotomy between the 'financial' economy,
by troad 4y ago
> In what kind of world does a strong jobs number, implying a strong economy, sink stock prices?
> There is a clear dichotomy between the 'financial' economy, and the actual economy. The pre-eminence of 'Shareholder value' should be relegated to the 20th century, and we should focus on making the economy serve society.
Low unemployment means wage inflation (as companies compete for scarce labor), which means more inflation in general, which raises the odds that the Fed - which is currently fighting very hard to try to constrain inflation, as the law requires it to do - will have to raise interest rates. This is good in the long run, in that inflation is very bad (and particularly bad for poorer households), but in the short run it hits stock prices because company borrowing will become more expensive, and there's some risk of over-correcting the economy into a recession.
I wish people making political points about economic news would at least try to understand the economic news first.
- jacknews 4y agoYou've provided an explanation (which I'm also completely familiar with) but not a rationale. What is really happening is that corporate profits are set to be squeezed (slightly) by rising costs, both labor and capital, and so that provides a reason why stock prices go down. But it doesn't answer the actual question, of why everything going great should be a bad thing.
- BurningFrog 4y agoThat question is answered quite well in the post you're commenting.
- jacknews 4y agoAs I said, the answer is just an explanation, which I'm quite familiar with, though I dispute that inflation is necessarily 'very bad'. "It's just money. It's made up" Our 20th century financial system is as much made up as it is 'fundamental economics' and it has now got out of hand,and proves to be unfit for the duty of serving society for the 21st century. As evidence, when strong job creation and economic growth is 'bad'.