Is Wall Street Closer to Main Street Than we Thought?
Reuters' Felix Salmon has a pretty striking graph comparing the path of the stock market and the trends in unemployment:
"It seems that the two indicators are much more coincident than you might think," he says. I believe that's the literary device commonly known as "understatement." A quick glance at the graph suggests that they're tightly tied. But stocks move faster than unemployment. The market drops a bit before the heavy layoffs begin. And so the question, for those invested in green shoots, is whether the opposite holds true. Stocks have begun to rise again. But it's not necessarily the case that unemployment will quickly follow.
It could be that the fall in the stock market coincides with factors that also reduced employment -- a dawning recognition of the indebtedness of the American consumer, say. But the return of the stock market might not be tied to the return of low unemployment. If investors are sensing that companies are undervalued, but companies aren't sensing that consumers can spend again, you might see investors buying for the long-term even as employers wait to fill out their payrolls.
May 26, 2009; 1:00 PM ET
Categories: Financial Crisis
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