Street: Falling unemployment not good for stocks

A worker assembles stand mixers on a production line in Ohio.
Luke Sharrett | Bloomberg | Getty Images

As unemployment falls, so too may the stock market.

This cold-hearted theory is being proposed by many on Wall Street.

"Signs of pressure from labor costs are starting to rear their head," Bank of Merrill Lynch equity strategist, Savita Subramanian, told clients on Monday.

Many companies in the this month have issued negative earnings pre-announcements and lower guidance because of rising wages and higher costs for benefits.

Case in point, during a conference call Monday, Brian Goldner, Hasbro CEO, noted that the single biggest input cost for the firm is labor. "We continue to see labor inflation rates in the double-digit range," he said.