Publication Type

Working Paper

Publication Date

5-2017

Abstract

In this paper we examine the macroeconomic information content of aggregate earnings from the labor market’s perspective. We use insights from the labor economics literature to characterize the information contained in aggregate GAAP earnings and its components that is relevant for predicting aggregate job creation and destruction, labor income, and unemployment. Our results suggest that not only does aggregate earnings news convey information about future labor market aggregates, but its information content is incremental to other macroeconomic variables at near-term horizons. Further, the source of this information stems primarily from two earnings components: aggregate core earnings and special items. Core earnings news signals persistent changes in economy-wide profitability that anticipate aggregate job creation and destruction up to four quarters ahead, while special items contain news only about job destruction at horizons of up to two quarters. Taken together, our results suggest that aggregate GAAP earnings contain useful information about future labor market conditions, with the nature of such information varying across earnings components.

Discipline

Accounting

Research Areas

Financial Performance Analysis

First Page

1

Last Page

62

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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Accounting Commons

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