When it comes to the stock market there are a good number of attributes involved that inspire investors to pump money into stocks or to withdraw money from the stock market. You might have noticed whenever the federal government announces a large upswing in the number of jobs in a given month the stock market always seems to jack way up, for whatever reason. While people investing into firms where more jobs are offered would make sense, this increase in favorable stock trading occurs across the board, meaning there is something else involved with possible improvements in the stock market. Because of this, it is a good idea to know and understand why exactly job increases actually have a favorable affect on the stock market.
For one, when more individuals are seen to have jobs, investors see this as a sign that these individuals are likely to begin spending more money. This means more money going into the economy and more money towards possible investments. With more people holding onto jobs, it leads to more individuals going out and buying material they might not usually obtain when without a high-paying job. For example, entertainment purchases usually go up because people have more money to spend. Due to this, individuals are able to buy televisions, computers and other entertainment technology. Investors like this and the news of more jobs and a lower unemployment rate, so they are more likely to purchase stocks in technology fields, like marketing automation, that are probably going to benefit from the additional jobs.
Good moods and bad moods have a rather remarkable affect on the stock market. If someone is frightened or actually fears where the economy is going they are going to sell their stocks, take their money and run. This doesn’t just happen to a few individuals but instead to a large number of people. Because of this you are going to find if the job news is bad, people become fearful as to where the economy is going and sell off their stocks (people who do this usually are not long-term or professional investors but instead the casual investors who have an eye on their stocks and an eye on the ‘sell’ button of their online investment account). On the other hand, these same individuals are likely to buy stocks when they feel comfortable with the stock market, where it is going and that the economy is moving in the right direction. A strong economy is good for all parties, including investors.
It is, to an extent, rather amazing at the kind of impact the jobless rate has on the United States economy and trading. No matter how strong the corporate sector appears or how much better off the economy actually is, if fewer jobs are created than expected or from the previous month, trading is likely to go down for a few days after the announcement. These announcements are usually not going to affect the stock market long term, as the positive news is eventually going to be evened out with negative news that doesn’t essentially have anything to do with the stock market itself. So, while it does appear the stock market increases rather drastically due to favorable job numbers, the stock market is most likely going to move back down when numbers the following month come out and show the economy was not able to sustain the job growth of that magnitude for two consecutive months. Many investors are rather panicky and there isn’t much you can do about it, other than weather the storm and stick to your investment knowledge and experience.