With the Fed in a highly data-dependent mode, the markets continue to look for any clues on what could tip the policy maker’s decision-making process and, of course, signs that the widely anticipated recession could be in the offing. On that front, labor market data seem to be taking center stage.

The markets received a variety of labor market data last week, and the overall interpretation appears to be changing by the minute. Typically, the primary focus is on the monthly Employment Situation report, but there were three other sets of data that captured investors’ attention beforehand: the Job Openings and Labor Turnover Survey (JOLTS) report, the ADP National Employment Report and the weekly initial jobless claims statistics.

In this go-round, all three of these aforementioned data sets were being viewed as potential harbingers that U.S. labor market activity was finally beginning to weaken. First up, the JOLTS report revealed that job openings declined more than expected, falling below the 10 million threshold for the first time since 2021. However, when you look a little closer, this headline was a little bit misleading. Job openings above the 10 million mark puts you in rarefied air. Going back 30 years, the JOLTS number had never been above this level before, with the average figure being about half this amount at about 5.2 million. In fact, the highest reading prior to the COVID-19-related effects was 7.6 million.

With respect to the ADP release, it was reported that the U.S. added a less-than-consensus 145,000 private workers in March, the third-smallest gain in the post-COVID-19 recovery era. Unlike the JOLTS data, we couldn’t find any “wrinkles” in this data series. That brings us to the weekly jobless claims numbers. The level of claims increased at a visibly higher-than-projected 228,000 and was preceded by a noticeable upward revision to the prior week of 48,000, bringing that tally up to 246,000. As the reader will recall, jobless claims had been stubbornly low, consistently coming in at or below the 200,000 mark prior to this report. However, there is an asterisk here. This “new” elevated level was essentially payback from the seasonal adjustment process the Bureau of Labor Statistics had been using since COVID-19, which arguably was depressing the claims totals. Doing a 10-year pre-COVID-19 look back, the average level of claims was 305,000, underscoring how the current number is still historically on the low side. For the record, jobless claims have tended to be more in the 350,000 to 400,000 range before a recession.

Finally, we turn our attention to the widely followed monthly jobs report. After two outsized gains for January and February, total nonfarm payrolls rose by +236,000, basically in line with consensus forecasts. However, the unemployment rate fell -0.1 pp to 3.5%. Civilian employment was up a solid +577,000, while the labor force rose +480,000, both good indicators of labor market activity. Wages still remain a bit elevated, but the decelerating trend continued. On a year/year basis, average hourly earnings rose +4.2% but are down -1.7 pp from a year ago.

When you look at the employment-related data in its totality, you could come to the conclusion that labor market activity has probably peaked, but it is still not pointing toward an imminent recession, let alone summer rate cuts from the Fed. Against this backdrop, we would argue that given the incredible rally in Treasury (UST) yields the last few weeks, a lot of “bad” news has already been factored in.