Public Release: 

Bad news for employment can be good news for the stock market

Blackwell Publishing Ltd.

A recent study in The Journal of Finance finds that the way the stock market reacts to unemployment news conveys information about the state of the economy. Stock prices rise on average on announcement of higher than anticipated unemployment during economic expansions, This is because unemployment news itself is a bundle of three primitive types of news: the level of future interest rates, the growth of corporate earnings and dividends in the future, and the expected return on stocks. The nature of the bundle and, hence, the information that unemployment news conveys, and the importance of its effects, varies based on the state of the economy. Information about interest rates dominates during economic expansion and information about future corporate earnings and dividends dominates during economic downturns.


This study is published in the current issue of The Journal of Finance. Media wishing to receive a PDF of this article please contact

The Journal of Finance publishes leading research across all the major fields of financial research. It is among the most widely cited academic journals on finance and one of the most widely cited journals in all of economics as well. For more information on the journal and the American Finance Association, visit

John H. Boyd is the Kappel Chair in Business and Government, Carlson School of Management, University of Minnesota. He is also a consultant at the Federal Reserve Bank of Minneapolis. He can be contacted.

Ravi Jagannathan is Chicago Mercantile Exchange Distinguished Professor of Finance at the Kellogg Graduate School of Management, Northwestern University. He is also a Research Associate at National Bureau of Economic Research. He can be contacted.

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