{"id":108459,"date":"2024-08-05T14:57:44","date_gmt":"2024-08-05T14:57:44","guid":{"rendered":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/08\/05\/is-the-us-economy-heading-for-recession-after-stock-market-slump\/"},"modified":"2024-08-05T14:57:45","modified_gmt":"2024-08-05T14:57:45","slug":"is-the-us-economy-heading-for-recession-after-stock-market-slump","status":"publish","type":"post","link":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/08\/05\/is-the-us-economy-heading-for-recession-after-stock-market-slump\/","title":{"rendered":"Is the US economy heading for recession after stock market slump?"},"content":{"rendered":"
\"Is<\/div>


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Over the past few days, global stock markets have been in a slump.<\/p>\n

Trading screens across the US, Asia and, to a certain extent, Europe are awash with blinking red numbers heading south. <\/p>\n

The sudden turn comes as fears grow that the US economy – the world’s biggest – is slowing down.<\/p>\n

Experts say the main reason for this fear is that US jobs data for July, released on Friday, was much worse than expected.<\/p>\n<\/div>\n

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However, for some, talk of an economic slowdown – or even a (whisper it) recession – is a little premature.<\/p>\n

So, what did the official figures show us? As always with economics, there is good news and bad news.<\/p>\n

Bad news first. US employers created 114,000 jobs in July which was way below expectations of 175,000 new roles.<\/p>\n

The rate of unemployment also rose to 4.3%, a near three-year high, which triggered something known as the “Sahm rule”.<\/p>\n

Named after American economist Claudia Sahm, the rule says if the average unemployment rate over three months is half a percentage point higher than the lowest level over the past 12 months then the country is at the beginning of a recession.<\/p>\n

In this case, the US unemployment rate rose in July, so the three-month average was 4.1%. That compares to the lowest level over the last year which was 3.5%.<\/p>\n

Adding to these concerns was the fact that the US Federal Reserve voted last week not to cut interest rates.<\/p>\n

Other central banks within developed economies, including the Bank of England and the European Central Bank, have recently cut interest rates.<\/p>\n

The Fed held borrowing costs but its chair, Jerome Powell, signalled that a cut in September was on the table.<\/p>\n

However, this led to speculation that the Fed had waited too long to act.<\/p>\n

A cut in interest rates means it is cheaper to borrow money which should, in theory, act as a boost to the economy.<\/p>\n

If the jobs figures suggest that the economy is already tipping downwards, then the fear is the Fed is too late.<\/p>\n

Then, on top of all this, are technology companies and their share prices. There has been a long-running rally in their shares, fuelled in part by optimism over artificial intelligence (AI). <\/p>\n

Last week, the chip-making giant Intel announced it was cutting 15,000 jobs. At the same time, market rumours suggested that rival Nvidia may have to delay the release of its new AI chip.<\/p>\n

What followed was a bloodbath on the Nasdaq, the technology-heavy US index. After hitting a high only a few weeks ago, it plunged by 10% on Friday. <\/p>\n

That helped pump-up the fear factor across markets and that’s where danger could lie.<\/p>\n

If stock market panic continues and shares keep plunging the Fed could potentially step in before its next meeting in September and cut interest rates.<\/p>\n

This could happen, according to Neil Shearing, group chief economist at Capital Economics, if there is “a market dislocation that deepens and starts to threaten systemically important institutions and\/or broader financial stability”.<\/p>\n<\/div>\n

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Now for the good(-ish) news.<\/p>\n

\u201cWe are not in a recession now,” according to Ms Sahm herself, inventor of the rule.<\/p>\n

She told CNBC on Monday that “the momentum is in that direction.\u201d<\/p>\n

But she added: \u201cA recession is not inevitable and there is substantial scope to reduce interest rates.\u201d<\/p>\n

Others are equivocal about the jobs data,<\/p>\n

“While the report was bad it wasn\u2019t that <\/i>bad,” said Mr Shearing.<\/p>\n

“It is likely that Hurricane Beryl contributed to weakness in July\u2019s payrolls figure. Other data painted a picture of a labour market that is cooling, but not collapsing,” he said.<\/p>\n

He added that there appeared to be “no increase in firings” while a “modest” decline in average weekly hours worked in July “does not scream ‘recession'”.<\/p>\n

For Simon French, chief economist and head of research at Panmure Liberum, after digesting the US jobs data it’s time to take a moment.<\/p>\n

“Stepping back, have we suddenly re-appraised the health of the world\u2019s biggest economy? No and nor should we.”<\/p>\n

But he added: “It is another data point at a time when liquidity is thin and you\u2019ve got a lot of things to worry about.”<\/p>\n<\/div>\n


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Over the past few days, global stock markets have been in a slump. Trading screens across the US, Asia and, to a certain extent, Europe are awash with blinking red numbers heading south. The sudden turn comes as fears grow that the US economy – the world’s biggest – is slowing down. Experts say the […]<\/p>\n","protected":false},"author":2,"featured_media":108460,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"tdm_status":"","tdm_grid_status":"","fifu_image_url":"https:\/\/ichef.bbci.co.uk\/news\/1024\/branded_news\/c75b\/live\/7e428900-5330-11ef-b68c-fffc4c1fcaa7.png","fifu_image_alt":"","footnotes":""},"categories":[604],"tags":[1933,3602,1602,2434,8188,1601],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/108459"}],"collection":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/comments?post=108459"}],"version-history":[{"count":1,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/108459\/revisions"}],"predecessor-version":[{"id":108461,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/108459\/revisions\/108461"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/media\/108460"}],"wp:attachment":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/media?parent=108459"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/categories?post=108459"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/tags?post=108459"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}