Boom goes the dynamite, and apparently, also the jobs market. U.S. employers added 528,000 jobs to the economy in July, more than double the 258,000 jobs that economists had forecasted. The unemployment rate fell to 3.5% from 3.6%, the lowest level since February 2020, just before the pandemic hit. That means the labor market has now recovered from the pandemic—in less than three years. What's more, the pre-pandemic unemployment rate of 3.5% is the lowest since 1969.
So… what recession? Despite two consecutive quarters of declining gross domestic product (GDP), it's unlikely that the country is in a recession with the labor market not just going strong, but booming. That means workers have money in their pockets that they can use to go out and buy things, which stimulates the economy. Remember, 70% of the U.S. economy is based on consumer spending.
But if you've looked at the markets today, they aren't exactly jumping about the news, with the S&P 500, Nasdaq, and Dow on the decline. Why is that? Today's jobs report could be a case of "good news is bad news" for some, because investors are looking beyond this report and digesting what it could potentially mean in the future. And instead of celebrating the strength of the economy, they may be getting worried that this strong jobs report means the Federal Reserve will get even more aggressive with rate hikes as the central bank fights rising inflation.
The higher rates go, the more economic growth could be impacted, which means that corporations won't do as well. And there is of course, the increased likelihood of a recession, though this jobs report seems to make it clear that we likely aren't in one—at least for now.
- Kristin
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