That’s not as evil as it sounds. Looking strictly at the numbers, a rise in unemployment numbers means some businesses may be able to find workers willing to take slightly lower pay.
Lower labor costs, especially for service industries, can translate into higher profits and higher stock prices.
However, when the economy is on the way down, higher unemployment numbers mean fewer consumers buying.
Fewer consumers buying means trouble for the retail sector.
Close StoresRetailers may have to close stores or reduce employee hours, which means less money in the economy for people to buy things.
This leads to further reductions in retail (and related) businesses, which leads to even fewer spenders, which leads….
Well, you get the picture. Rising unemployment numbers in a bad economy drag the economy down even more and stocks along with it..
Clearly, when things are tight, one of the best stimulus plans is job creation.
No one argues that more jobs are a bad thing.
However, there are many different views on how to stimulate job creation.
One theory holds that lowering interest rates will encourage businesses to expand and begin hiring.
Another theory says that when the economy is in a difficult spot, it is up to government to provide the stimulus to get things going through public works jobs and so on.
In a really bad economy, business and government cannot do too much.
When unemployment numbers are skyrocketing, it’s not time to worry about inflation or ideology.