Macroscope | When stock markets fall on good jobs data and easy money is the norm, we are in the midst of a Mad Hatter’s tea party
- Stock markets fell despite better-than-expected US jobs data, as investors anticipated that monetary policy tightening would follow. This reveals a dangerous addiction to easy money
Alice was walking in Wonderland when the White Rabbit rushed by, glancing anxiously at his pocket watch. “Can’t stop to talk, got to pass on the bad news,” he gasped. “What bad news?” inquired Alice. “Haven’t you heard?” came back the response. “The employment data is even better than expected.”
Surely you mean, said Alice, “worse” than expected if that is the bad news? “No,” snapped the White Rabbit, “the number of jobs is up and that’s bad news for the stock market.” But, protested a now rather bemused Alice, rising employment must be “good” news for the Wonderland economy and for stocks.
The rabbit gave her a patronising smile. “I mean what I said. More jobs mean less monetary easing from the Bank of Wonderland and the market needs more easy money to prop it up or it will fall.” “Curiouser and curiouser,” thought Alice, “this is even more bizarre than the Mad Hatter’s tea party.”
This is what happened in the United States when recent non-farm payroll figures showed a higher than expected jump in job creation. However transient that phenomenon may prove to be, it should have been welcomed by investors as a sign that the world’s biggest economy is still in good shape.
