The S&P 500 index experienced its sharpest weekly decline in over 18 months, driven by a cooler-than-expected labor market report that prompted investors to reduce risk exposure. Tech stocks were particularly hard hit, with semiconductor companies facing the worst performance. The slowdown in job growth raises questions about the Federal Reserve’s future rate cuts, leading to market uncertainty.
The US economy added 142,000 jobs in August, signaling a rebound from July’s weak performance and easing recession fears. This positive development was accompanied by a decline in the unemployment rate and a rise in average hourly earnings, indicating a robust labor market.
US stock markets experienced a downturn on Thursday, driven by signs of a cooling labor market and rising oil prices. The ADP report revealed a slowdown in private sector job growth, while a stronger-than-expected services sector provided some relief to recession fears. The S&P 500 index dropped below the 4,500 support level, extending weekly losses to 2.9%. The Dow Jones slid 0.8%, while small-cap stocks fell 0.6%. OPEC+’s decision to delay an oil production increase further pressured investor sentiment, pushing up crude prices. Crypto assets also weakened, with Bitcoin falling 3%.
Disappointing private employment growth in August has bolstered market expectations for a significant rate cut by the Federal Reserve this month. The news sent interest rate-sensitive assets like gold and the Japanese yen soaring, while pushing Treasury yields lower. The ADP National Employment report showed a sharp slowdown in hiring, with private employers adding just 99,000 jobs in August, well below forecasts. This followed a series of other indicators signaling a weakening labor market, including a decline in job openings and a surge in job cuts.
The number of job openings in the US fell in July, raising concerns about the health of the labor market and the broader economy. This follows recent revisions that downgraded job gains over the past year, adding to the uncertainty surrounding the economic outlook.
Job openings in the United States fell sharply in July, reaching their lowest level in over three years, indicating a cooling labor market. This decline, particularly in sectors like healthcare and government, suggests a potential slowdown in employment growth and raises concerns about the Federal Reserve’s future rate decisions.
Investors are closely watching this week’s economic data releases, particularly the August jobs report, as they anticipate the Federal Reserve’s next move on interest rates. A strong jobs report could temper expectations for a large rate cut, while a weak report could fuel further calls for aggressive action from the Fed.
Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Symposium has sparked debate, with economist Claudia Sahm praising his emphasis on the Fed’s dual mandate and a potential shift in labor market policy. Sahm highlighted Powell’s statement that the Fed does not seek further cooling in labor market conditions, a significant departure from previous pronouncements. Powell’s remarks come as the U.S. economy faces potential recessionary pressures and a cooling labor market.
Despite the apparent resilience of the U.S. economy, some experts believe the situation may be more precarious than official data suggests. Scott Shellady, a market analyst, argues that government spending has been the primary driver of economic stability, masking a potential slowdown in the labor market. He warns that the Fed is facing a difficult decision as rate cuts could rekindle inflation, while maintaining current rates could worsen the labor market.
The latest unemployment figures show a slight increase in initial jobless claims, indicating a possible cooling in the labor market. While the increase was modest, it comes after a period of declining claims, suggesting a potential shift in employment trends. The data also revealed an uptick in continuing claims, but the overall picture remains positive with a low unemployment rate.
