When bad news is good

Bad news for the U.S. economy is good news for the stock market… isn’t it?

The market reaction to the U.S. jobs report comes down to a simple observation: bad news is good news, as long as it is not too bad.

Stocks rallied sharply after the Labour Department said nonfarm payrolls rose by 150,000 in October 2023, 20,000 fewer than expected but a difference caused mostly by the auto strikes, which appear to be over – a case of bad news is good news.

For the Federal Reserve, the relatively constrained job creation coupled with wage gains nearly in line with expectations adds up to a scenario in which the central bank doesn’t really have to do anything.

The Fed finally got what it’s been looking for – a meaningful slowdown in the labour market.

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