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September 13th, 2007 10:34 AM by David W. Welch
The stock market is always amazing to me. Unemployment goes up, so the market reacts...(pause for effect)...by going up. You have to look at the whole picture though. Basically, the Fed is concerned about inflation. A key indicator of inflationary pressures is employment. If employment numbers are up, then companies usually have to offer more money to get good people. This pushes upward on prices. So, if employment is down a bit, the hope is that the Fed will be less concerned about inflation. If the Fed is less concerned about inflation, they may be more inclined to reduce interest rates. If rates go down it will be less expensive to borrow money, so businesses (and hopefully home buyers) will invest more.