The Stock Market and Aggregate Employment
41 Pages Posted: 18 Aug 2009 Last revised: 1 Feb 2023
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The Stock Market and Aggregate Employment
Date Written: August 2009
Abstract
We study the interactions between the stock market and the labor market. When aggregate risk premiums are time-varying, predictive variables for market excess returns should forecast long-horizon growth in the marginal benefit of hiring and thereby long-horizon aggregate employment growth. Consistent with this logic, we document that long-horizon payroll growth and change in unemployment rate are predictable with risk premium proxies. Lagged payroll growth and change in unemployment rate also forecast stock market excess returns.
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