The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

Bad News = Good News

06/08/2019

Yesterday’s employment report was considered bad news, as only 75 thousand jobs were created in May, while 180 thousand had been expected.  Bad News!  So, why did the Dow rise 263 points?  Because that increases the probability that the Fed will cut interest rates.  Clearly, the market believes that short-term interest rates – the only interest rates directly controlled by the Fed – are too high – causing the yield curve to invert, which happens when short-term rates are higher than long-term rates.  An inverted yield curve is considered a predictor of recession.

That’s all true, and it’s great that the Dow rose 263 points!  However, I would be happier if it rose . . . because our exports rose, or because productivity jumped, or because profits surge or ??

263 more points are always welcome, but these were not “quality” points.

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