Carpe Diem

Chart of the day: US stock market vs. US labor market

The chart above is similar to one featured on page one of Friday’s “The Gartman Letter” (courtesy of Charles Brady at Fox Business Network), and shows the amazing correlation over the last five years between: a) the S&P 500 Stock Index, and b) the 4-week moving average of initial jobless claims (inverted).  As Dennis Gartman commented about this “stunning” correlation: “As go claims, so shall go the stock market.”  Yes, the correlation is quite stunning at -0.93, and I had to check for myself and was thus inspired to create the chart above.  Perhaps this correlation has been documented before, but it’s new to me and perhaps to many of you, too.

Update: Scott Grannis has previously reported on this correlation many times on his blog starting back in October 2011, see several of his graphs and posts here, here and here.

What about over a longer period of time? The chart below shows the same two variables back to January of 2000, and over the last 13 years the correlation between the stock market and jobless claims (inverted) is still pretty strong, although the correlation coefficient drops to -0.68.

Bottom Line: No deep thoughts about this, other than to observe that the US stock market and labor market are highly correlated, but that is really nothing new; it’s just interesting to see how highly correlated the two markets have been over the last five years.  And now that the S&P is at the highest level in more than five years (since December 2007) and apparently heading even higher this year, we can look for a gradually improving labor market and continued decreases in jobless claims.

 

15 thoughts on “Chart of the day: US stock market vs. US labor market

  1. The high correlation between the U.S. labor market and the S&P 500 is surprising to me considering the multi-national business level of the 500.

  2. Why not look at something a bit more meaningful like the labour participation rate? The simple fact is that people are giving up looking for jobs as they rely on disability payments, food stamps, and the other ‘safety net’ programs to get paid while they stay at home. Since those programs are kept afloat by liquidity injections by the Fed it is not all that surprising to see real estate, commodities, and stocks all go up as long as the printing continues.

  3. This stinking Marxist has brought the S&P back by 84%!

    When will America wake up to this Socialist tyrant who is shrinking jobless claims, sending corporate profits to all time highs, and making homes affordability higher even as lumber prices hit all time highs!

    Don’t say we didn’t warn ya. No siree, Bob!

  4. “the S&P is … apparently heading even higher this year”

    I am curious as to how you are able to draw this conclusion. I’m sure many people said “My house’s value is heading even higher this year!” back in 2007.

    • “the S&P is … apparently heading even higher this year”

      I am curious as to how you are able to draw this conclusion. I’m sure many people said “My house’s value is heading even higher this year!” back in 2007.

      When the USD is devalued by 50% or more we should see the S&P go up in nominal terms even if it declines against gold and is losing value in real terms.

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