U.S. stocks were in and out of positive territory Thursday, while Treasury bond yields extended their recent run of declines, following a much weaker-than-expected reading of weekly unemployment claims that suggests Federal Reserve rate and a simmering bank crisis have finally cracked the red-hot jobs market.
Around 228,000 Americans filed for jobless benefits over the week ending April 1, a tally that was well ahead of the Street's forecast of 200,000 new claims. The prior week's tally, meanwhile, was revised to 246,000 from an original estimate of 198,000, suggesting weakness has been evident in the job since the collapse of Silicon Valley Bank, and the subsequent closure of Signature Bank, in early March.
The Labor Department data followed figures from Challenger & Gray's closely-tracked report of monthly layoffs, which showed job cuts rising 15% over the month of March, to 89,703, more than triple the figures recorded over the same period last year.
First quarter job cuts, Challenger Gray said, were up four-fold from last year to 270,416.
“We know companies are approaching 2023 with caution, though the economy is still creating jobs. With rate hikes continuing and companies’ reigning in costs, the large-scale layoffs we are seeing will likely continue,” said senior vice president Andrew Challenger. “The Technology sector is leading all industries, and this talent is in demand across industries. In fact, 38% of all cuts are in the Tech sector."
The red-hot job market, however, has started to show signs of cracking this week, with ADP's national employment report indicating only 142,000 new hires in March and the February JOLTs update showing unfilled positions fell below the 10 million mark for the first time in nearly two years.
That puts extra focus on both Friday's employment report, which is expected to show that the U.S. economy likely added around 240,000 new jobs last month, according to Street forecasts, a tally that would take the first quarter total to just over 1 million.
The report is also likely to indicate average hourly earnings rising 0.3% on the month and the headline unemployment rate holding at 3.6%.
"Many market pundits have pondered over the strength of labor markets given an expectation of a slowing of the economy but the data itself has been skewed towards the services sector when you look under the hood," said James DiChiaro, senior portfolio manager at Insight Investment
"Despite a rising labor participation rate, the number of early retirements and other demographic factors has left certain parts of the labor market in short supply, within services specifically," he added.
On Wall Street, stocks moved lower in thin volumes following the weekly jobless claims data, with the S&P 500 marked 10 points higher in the opening hours of trading and the Dow Jones Industrial Average gained 17 points. The tech-focused Nasdaq was up 70 points.
Benchmark 10-year note yields touched a fresh six-month low of 3.270% in New York trading, extending their slide to a seventh consecutive session, amid growth concerns linked to a slump in services activity and the weaker employment data.
Rate-sensitive 2-year note yields, meanwhile, were pegged at 3.792% while the U.S. dollar index holding near a two-month low of 101.760 against its global peers
The CME Group's FedWatch, meanwhile, is indicating a 53% chance that the Fed will hold the Fed Funds rate steady at between 4.75% and 5% next month in Washington, with bets on a July rate cut pegged at around 47%.
