The US labour market is losing momentum

Wall Street went up yesterday

Thursday has been a positive day for the US stock market.

All three US major indexes closed in profit.

The S&P 500 finished at +0.36%, the Nasdaq ended the trading session at +0.76% and the Dow Jones closed at +0.01%.

The reason behind the movement is that investors are changing their focus from the potential banking crisis to economic health, interpreting the slowing down of the labour market as a sign of cooling inflation.

The investors' sentiment is Greed, as indicated in the graph below:

Sentiment indicator - Fear & Greed Index

The market sentiment, updated yesterday, was 57, in “Greed” mode.

The US labour market is losing momentum

After the pandemic, the US labour market has risen rapidly and many employers have kept hiring despite historically high inflation and a fast interest rates increase monetary policy implemented by the Federal Reserve.

The unemployment rate in the US is low, despite the recent layoffs of some big companies such as Amazon (NASDAQ:AMZN), Meta, Salesforce, Zoom Video Communications and Goldman Sachs Group Inc (NYSE:GS).

Based on the recent job market data, however, it looks like the labour market is starting to cool down.

The Labor Department yesterday, has reported 228,000 new weekly applications for unemployment benefits, 28,000 more than the economists forecasts.

The failure of SVB and another regional bank have had no impact yet on the data reported yesterday, so it will likely add more pressure on the job market next month.

What to watch

The stock market today is closed for Good Friday, but important data will be released.

The closely watched non-farm payrolls report will be published by the Labour Department today at 13:30 GMT.

Some investors are welcoming the high unemployment rate because that means that inflation is reducing and the Federal Reserve is doing a good job.

Until now, the strong labour market and rising wages have been major contributors to inflation.

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