Since the end of August, the S&P 500 has fallen by about 2%. Although September’s US Employment Report was healthy, with the jobless rate falling below 6% for the first time in more than six years, a stronger labour market could be a mixed blessing for US equities if it becomes too tight. This is because a decline in the jobless rate to less than its “natural” level – something we expect to happen next year – would result in a cyclical increase in labour’s share of income, at least if history is any guide. The flipside would be a fall in the profit share, with the result that the value of the stock market would probably grow more slowly than the economy itself. This is a reason why we expect the S&P 500 to climb to just 2,000 by end-2015.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services