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Overlooking Labor Market’s Momentum

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Overlooking Labor Market's Momentum

In jaded times with the slow development of the economy, there is a thing that is not really appreciated: The steadiness of monthly job gains – the labor market.

For a clearer picture, market momentum is the ability of a market to sustain an increase or decrease in prices. Market momentum is a function of a price change during a specific period of time versus the trading volume during that period. In other words, high trading volume increases the market momentum of a price change and vice versa.

On the other side, labor market in itself is ratio of the supply of available workers in relation to work availability. Labor markets may be local or national (even international) in their scope and are made up of smaller, interacting labor markets for different qualifications, skills, and geographical locations. They depend on exchange of information between employers and job seekers about wage rates, conditions of employment, level of competition, and job location.

For the past three years, the labor market is adding more than 200,000 jobs per month. The lack of magic in each month that passes by might be the very reason why volatility following these reports has significantly lessened.

The solid track record of the labor market means that if there is any following month that falls short, it will likely be showing to be a deviation rather than the symptom of a more serious matter. That is the issue ahead of Friday’s job’s report. The Federal Reserve will weigh in as to whether or not to raise the interest rates again in June’s policy meeting.

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