In the stock market, bad news can sometimes be good news. Over the past year, US unemployment has inched up from 3.4% to 3.9%. Recent data from the Bureau of Labor Statistics points to a contracting economy, with jobless rates rising in 305 out of 389 metro areas. In nearly 10% of these cities, unemployment jumped by more than one percentage point.

• According to Piper Sandler’s Chief Global Economist Nancy Lazar, 21 states — which account for nearly 40% of US GDP — saw their unemployment rates rise by 0.5 percentage points from their 12-month lows.
• Yesterday, the Bureau of Economic Analysis also revised the first quarter US GDP growth from 1.6% to 1.3%, indicating that the economy grew slower than expected.

But it’s all part of the plan: The GDP data signals that higher borrowing costs are starting to impact the economy — ironically, a positive sign for those waiting for interest rates to fall. Historically, a slowing economy and improving corporate earnings create “the best macro environment for stocks,” according to Bank of America strategists. Why? Because it often leads to lower interest rates.