The Stock Market and Aggregate Employment
40 Pages Posted: 16 Jul 2009 Last revised: 16 Sep 2009
Date Written: August 2009
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.
Keywords: Time-varying risk premiums, payroll growth, unemployment rate, search and matching, time-to-build
JEL Classification: G31, G12, J23
Suggested Citation: Suggested Citation