- The U.S. added only 114,000 jobs in July, missing expectations, and the unemployment rate rose to 4.3%, the highest level since 2021. This has led to increased worries about an economic slowdown.
- The Dow Jones Industrial Average fell more than 600 points on August 2nd, and the NASDAQ Composite tumbled nearly 3%, heading into correction territory. Stocks continued to fall on August 5th, with global markets reacting, including Tokyo’s Nikkei 225 dropping 12.4%.
- On July 31st, Federal Reserve policymakers kept interest rates unchanged but indicated a rate cut is likely in September. The size of the cut is debated, with some economists advocating for a half-point reduction to counteract the economic downturn fears.
The pace at which America is adding jobs is declining. Hiring slowed down to around 114,000 jobs last month, missing expectations. The unemployment rate rose to 4.3%, its highest level in nearly three years, when the economy was still recovering from the pandemic. Job growth slowed sharply in July, and the unemployment rate rose to its highest level since 2021, according to the Labor Department.
This led to a market downturn on Friday, August 2nd. The Dow Jones Industrial Average fell more than 600 points. Stocks fell sharply after the data was reported, reflecting investors’ renewed worries about an economic slowdown. Everything from banking stocks to small companies took big hits, and Treasury yields fell below 4%.
The technology-heavy NASDAQ Composite tumbled nearly 3% and was on track to close in correction territory, down at least 10% from its recent high. Unfavorable earnings reports from big technology companies have led some investors to question whether the mania around artificial intelligence, which has fueled tech stock growth this year, has gone too far.
Stocks further fell on Monday, August 5th, as fears that the U.S. is at risk of recession spread across global markets. Tokyo’s Nikkei 225 plunged a staggering 12.4%, its largest one-day drop since the October 1987 Black Monday crash. Traders, fearing that the Federal Reserve has waited too long to cut interest rates and that the economy is already in a downturn, moved their money to the safety of U.S. government debt. CNN’s Fear & Greed Index, which measures whether stocks are fairly priced, reads ‘extreme fear’ after last week’s events. The index assumes that fear will continue to drive stocks lower.
Federal Reserve policymakers on Wednesday, July 31st, kept rates unchanged but strongly implied a rate cut would be coming in September. It is all but guaranteed that the cut will happen, but economists argue over the size of the cut, with many asking for a half-point cut instead of a quarter-point. Chair Jerome Powell said a larger half-point cut wasn’t “something we’re thinking about right now,” but added that officials haven’t made “any decision at all.” At a certain point, the job market had to cool off from the post-pandemic hiring spree; the question is whether this cooldown will lead to a recession.