Despite weaker U.S. job market data, stock markets are holding steady

Investors on Wall Street and other markets kept their heads cool as data in the United States showed more signs that the labour market is weakening.

Wall Street is holding steady on Thursday as the countdown ticks to an update on the U.S. job market coming Friday that could clear the way for the cuts to interest rates that investors love.

The S&P 500 rose 0.2 per cent in early trading. The Dow Jones Industrial Average was down 45 points, or 0.1 per cent, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.4 per cent higher.

Treasury yields were also easing in the bond market following the latest discouraging signals on the job market. One report suggested U.S. employers, excluding the government, nearly halved their hiring last month. Another said that more U.S. workers applied for unemployment benefits last week, an indication of rising layoffs.

Neither number is flashing a recession, but a slowdown in the job market could push the Federal Reserve to consider cutting its main interest rate for the first time this year at its next meeting in a couple weeks. So far this year, the Fed has been keeping rates on hold because it’s been more worried about inflation potentially worsening than about the job market.

Cuts to interest rates can give the economy and job market a kickstart, but they can also push inflation higher.

“The year started with strong job growth, but that momentum has been whipsawed by uncertainty,” according to Nela Richardson, chief economist at ADP. She said several things could be behind the slowdown, including “labor shortages, skittish consumers, and AI disruptions.”

A much more comprehensive report on the job market from the U.S. Labor Department will arrive on Friday, and it will likely carry much weight with the Fed. Ahead of it, the yield on the 10-year Treasury fell to 4.19 per cent from 4.22 per cent late Wednesday.

Last month’s grim July jobs report, which included massive downward revisions for June and May, sent financial markets spiraling and prompted President Donald Trump to fire the head of the agency that compiles the monthly data.