Employment growth to raise the market price of stocks

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After rallying for most of February to reach record highs in the month, the s&p 500 stock index fell sharply on Friday march 6 following news that the economy added 295,000 jobs, bringing the unemployment rate down to 5.5%. Analysts were expecting job growth closer to 235,000.

a) Why would you typically expect faster than expected employment growth to raise the market price of stocks? Explain your answer in a few sentences.

b) Why do you think the stocks fell over 1% on the news instead? Explain in a few sentences.

Reference no: EM13731015

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