The Department of Labor’s monthly labor-market updates have been driving outsize swings in U.S. stocks since the start of 2023, a sign that one of the most closely watched economic-data reports has regained some of the relevance it ceded to inflation data last year.
Since the start of 2023, the S&P 500 SPX has moved on average 1.7% in either direction in response to the NFP data, which was long seen as the marquee economic data series in the U.S., according to several economists and market strategists. For example, on Sept. 13, hotter-than-expected August data sent the S&P 500 down 4.3%. On Nov. 10, a weak October reading helped send the S&P 500 rallying 5.5%.
Jobs data shows that the U.S. labor market has continued to chug along, despite other signs that growth might be slipping. For example, the Institute for Supply Management’s manufacturing gauge fell to 46.9% in May from 47.1% the month before, according to data released Thursday. Any reading below 50% indicates a slowdown, and the data have been reporting dismal results for months.
But in a broader sense, labor-market data has taken on renewed importance since the labor market is seen as the last bulwark against recession, and stocks have recently pulled back in the face of other data showing that one might soon arrive.“Employment growth is a critical prerequisite for economic growth,” she told MarketWatch.
Why did stocks sell off in response? According to Michael Lebowitz, a portfolio manager at RIA Advisors, blockbuster jobs numbers make traders nervous that the Federal Reserve might need to jack up interest rates even higher.
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