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Is the Job Market Stabilizing?

May 20, 2026

Time to Read: 2 minutes

After sluggish job growth in 2025, investors are looking for signs that the labor market may be stabilizing. With consumer spending driving 70% of economic activity, an improving labor market is essential to sustaining economic growth.

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Since April 2022, job availability, as measured by the Indeed Job Postings Index, has trended lower, softening confidence in the labor market. With consumer spending accounting for 70% of gross domestic product (GDP), lower confidence in the ability to find jobs could prompt consumers to pull back spending — and weigh on economic growth.

Recently, however, the Indeed Job Postings Index has shown signs of stabilizing, along with other job market indicators. The index has been in an uptrend since last October and job growth year to date stands at 304,000, compared to the 116,000 jobs for all of 2025. Initial weekly jobless claims — a timelier measure of labor market health — have averaged 204,000 over the last four weeks, the lowest in four years. Continuing jobless claims have also fallen from their peak of 1.96 million in July of 2025 to 1.77 million – the lowest in over two years. And, despite recent headlines, layoffs year to date through April are the lowest since 2022.

While job growth may be resetting to a lower monthly average because of aging demographics, reduced immigration and improved productivity, stabilization of the labor market may be another positive sign for the consumer and the broader economy.

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Not in a Bubble

As the S&P 500 approaches all-time highs, there are renewed concerns among investors about elevated valuations. However, historically strong profitability and expected earnings growth appear to support current pricing. In addition, the current S&P 500 price-to-earnings (P/E) ratio is roughly equal to the average since Covid. As a result, we do not view U.S. equities as being in bubble territory and we remain constructive on the asset class.

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Is the Market Rally Broadening?

Stocks, as measured by the S&P 500, are up over 13% through early August. The solid gains have been fueled by a resilient economy, steady consumer spending, optimism around artificial intelligence and better-than-expected earnings growth. Still, some investors worry the advance may be too concentrated in technology and AI-capex monetization may fall short of expectations. A closer look suggests that it is not just tech moving the market higher.

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Fed Friction?

Markets are navigating tensions caused by a Federal Reserve that offers less guidance and an inflation backdrop that remains sticky. Added uncertainty from the Middle East conflict and energy-price swings are further shaping sentiment, with recent moves in Treasury yields suggesting the market wants the Fed to hike. However, with yield volatility expected to linger in the near term, we see today’s elevated Treasury yields as an especially compelling opportunity in fixed income.

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Muni Yields Are Attractive

The war in Iran has increased volatility across fixed income markets, pushing municipal bond yields higher as investors reassess inflation risk, energy costs and the path of Federal Reserve policy. Even so, historically elevated municipal bond yields present a compelling opportunity for tax-sensitive investors.

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