I always thought it was good for everyone to have a job. Full employment meant that most people were earning money to feed their families and pay the rent. Apparently not anymore.

When rates of unemployment fell to their lowest level in 50 years recently, both here and in the US, we celebrated. Unemployment at 3.4% was a thing to behold.

In September 2023 the US added 336,000 jobs in one month. Good news!

It was deemed bad news by both the bond market and the share market. Bond interest rates went up (meaning the value of existing bonds went down), and shares went down.

In October 2023 the US only added 150,000 new jobs. Bad news!

Nope. It was considered good news by both the bond and the share market because it showed that the economy was cooling, things had been too good, and markets wanted to see that people are spending less, not more. If fewer people have jobs then that means less money in the system, less demand for stuff, less pressure on price rises.

Good news is bad news, and bad news is good news. A classic paradox.

Will it always be like this?

No. The market will stop worrying about 'good news' when inflation stops being the number one enemy of Central Banks. That is, when official rates of inflation are within the bounds of 1% to 3%, or averaging around 2% per annum, and expected to stay there. Then, and only then, will Central Banks and the markets stop worrying.

 At that time good news will mean something. With stable inflation and unemployment fluctuating around 5%, good news will mean higher profits for businesses pushing up share values, and lower interest rates will mean the value of existing bonds will have had a one-off windfall jump in value.

Not too hot; not too cold. The Goldilocks condition.

If only it would then stay like that forever.

The reality is that the fear of a recession (too many people out of work) and inflation (too many people in work) keeps everyone ever vigilant. And that is why we have a Central Bank. They can never sleep.

Keep asking great questions …