US stocks surged Thursday after new data on the labor market suggested that the economy may not be headed into the downward spiral that traders feared.
The Dow rose 683 points, or 1.8%. The S&P 500 gained 2.3%, notching its best day this year. The Nasdaq Composite added 2.9%, its best daily percentage gain since February.
First-time claims for unemployment benefits fell last week to 233,000 from the prior week’s upwardly revised total of 250,000, according to Department of Labor data released Thursday.
“Anything in that range tends to suggest a fairly healthy labor market,” wrote economist Joseph Brusuelas on X Thursday morning.
Economists had expected 240,000 initial claims for unemployment insurance for the week ending August 3.
The latest snapshot of America’s labor market reversed the sour sentiment that invaded the global market after the Bureau of Labor Statistics reported Friday that the economy had added just 114,000 jobs last month, far fewer than expected and well below the 200,000 average of previous months.
Still signs of weakness
But Thursday’s report wasn’t all good news for the job market.
It also showed that continuing claims, which are filed by people who have received jobless benefits for at least a week or more, increased to 1.88 million for the week ending July 27, the ninth-straight week at or above that level.
Weekly jobless claims data can be highly volatile and is frequently revised. It remains near pre-pandemic levels.
Fears of a downturn
The latest jobs numbers come as Wall Street attempts to bounce back from a market plunge that was mostly triggered by the weaker-than-expected July jobs report. Unemployment rose to 4.3% from 4.1%, amplifying concerns that the US economy is headed for a hard landing, which is when inflation is brought down to the Federal Reserve’s 2% target but at the cost of a healthy labor market.
Markets worldwide were suddenly gripped with fear Monday that the world’s largest economy could be slowing down more quickly than expected. That fueled massive losses on all three major US indexes, with the Dow at one point down by more than 2.6% and the Nasdaq losing 6%, entering correction territory.
Chris Larkin, managing director of trading and investing at E-Trade, said Thursday’s jobless claims data “may ease some of the concerns raised by last week’s soft jobs report.”
However, as investors begin to shift their focus from the labor market to next Wednesday’s key Consumer Price Index inflation report, “it’s unclear how much this will move the sentiment needle,” Larkin said in a statement on Thursday.
