Sevens Report: U.S. Labor Market Stable, But Cracks Emerging
Thresholds in claims and unemployment could trigger sharp equity declines
What does a soft jobs market mean for markets?
Sevens Report said U.S. labor conditions remain broadly stable despite recent weak data, citing jobless claims below 250,000, continued positive payrolls, and JOLTS near 7 million.
The firm warned, however, that momentum is fading: hiring is slowing even as layoffs remain limited. Key thresholds include jobless claims above 260,000, a four-week average above 300,000, unemployment over 4.5%, and JOLTS falling under 6.5 million. Each would signal real deterioration.
On market impact, Sevens cautioned that a sharp labor downturn could drive a 15%–30% equity drop, with the S&P 500 potentially sliding 500–700 points initially. Defensive sectors such as staples, utilities, and healthcare would likely outperform, alongside lower-volatility ETFs and mega-cap tech if the AI trade holds.
“Bottom line, the labor market is not bad; however, it is losing momentum and this is something we need to watch carefully,” the report said.
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