Markets are relaxing after preliminary jobs data suggests the country isn’t spiraling towards towards recession like many had assumed following the release of the July jobs report. As of yesterday, markets were back up, recouping some losses after the global sell off earlier this week.

So, what do you need to know about this week’s jobless claims?

Well, initial unemployment benefits claims in the U.S. fell by 17,000 to 233,000 in the week ending Aug. 3, per the Labor Department. This represents the largest drop in applications in almost a year, a promising sign after the dreary July jobs report.

States like Michigan, Missouri and Texas helped facilitate the change as they each experienced a slowdown in jobless claims last week, compared to weeks prior.

This drop in jobless claims may give traders confidence that the July jobs report represented more of a flash-in-the-pan rather than an indicator of a rapidly receding economy.

“The data bear watching for signals about a more material weakening in the labor market going forward, which would have implications for Fed policy,” said Carl B. Weinberg and Rubeela Farooqi from High Frequency Economics. “They signal modest economic slowing, not contraction!”

Slowing Weekly Jobless Claims Cool Recession Doomsday Theories

As a result of yesterday’s jobless claims numbers, many previously panicked predictions of an imminent recession have been largely tempered, having reached a fever pitch following last Friday’s jobs report.

That fever pitch was perhaps reasonable, as the July jobs data was quite bad. If you recall, the U.S. economy added just 118,000 jobs in July, bringing the unemployment rate to 4.3%, its highest level since October 2021. July was also the fourth straight month of rising unemployment.

What followed was a global market selloff that saw the S&P 500 lose almost 4% of its value in just two trading sessions, on Friday and Monday. Rate-sensitive tech stocks were hit particularly hard by the shift in market sentiment, with some of the biggest names of Wall Street, including Nvidia (NASDAQ:NVDA), taking on major losses. NVDA stock opened down more than 10% on Monday.

Since then, however, markets have recovered quite rapidly. Indeed, the S&P is almost back to its level prior to Monday’s drop, currently on track to log its third straight day of gains. There’s a similar story for the Nasdaq Composite, which is up more than 6% since the bottom of its fall on Monday.

This is all to say that it seems Monday’s fear-fueled sell-off may have been more of an overreaction than the beginning of an enduring stock market panic.

On the date of publication, Shrey Dua held LONG positions in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.