NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The stock market and aggregate employment

Long Chen, Lu Zhang

NBER Working Paper No. 15219
Issued in August 2009
NBER Program(s):   AP   EFG   LS

We study the interactions between the stock market and the labor market. When aggregate risk premiums are time-varying, predictive variables for market excess returns should forecast long-horizon growth in the marginal benefit of hiring and thereby long-horizon aggregate employment growth. Consistent with this logic, we document that long-horizon payroll growth and change in unemployment rate are predictable with risk premium proxies. Lagged payroll growth and change in unemployment rate also forecast stock market excess returns.

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