2024-09-06 14:13:47
Job growth in the US was weaker than expected last month, raising concern that the world’s largest economy is starting to stumble under the weight of higher interest rates.
Employers added 142,000 jobs in August, less than the roughly 160,000 analysts had forecast, the Labor Department said. It also said job gains in the previous two months were lower than initially estimated.
However, the unemployment rate fell back, dropping to 4.2% from 4.3% in July.
The report is one of the most important gauges of the US economy and comes at a critical time, as voters weigh presidential candidates for the November election and the US central bank debates its first cut to interest rates in four years.
Analysts said the latest figures kept the Federal Reserve on track for a rate cut at its meeting this month, but would do little to resolve questions about the direction of the US economy or how big a cut it should make.
“Rarely has there been such a make or break number – unfortunately, today’s jobs report doesn’t entirely resolve the recession debate,” said Seema Shah, chief global strategist at Principal Asset Management.
Soaring prices in 2022 prompted the Federal Reserve to raise its key lending rate to 5.3%, a roughly 20-year high.
Faced with higher borrowing costs for homes, cars and other debt, the economy has slowed, helping to ease pressures that were fuelling inflation, but adding to market jitters.
As inflation has subsided, falling to 2.9% in July, the Fed is now under pressure to cut rates and ward off further economic slowing.
The job gains in August, although below estimates, were higher than July, when a slowdown sparked fears and prompted several days of stock market turmoil.
Construction and health care firms led the hiring last month, while manufacturers and retailers got rid of roles.
Ms Shah said the data in Friday’s report was mixed, but contained enough worrying signs that the Fed should make a bigger cut.
“On balance, with inflation pressures subdued, there is no reason for the Fed not to err on the side of caution and frontload rate cuts,” she said.
But others said the gains were just steady enough to warrant a 0.25 percentage point cut, as markets have long predicted – though it might be a sign of more cuts than expected in the months ahead.
The Fed’s decision would be “close run”, said Paul Ashworth, chief North America economist for Capital Economics.
“The labour market is clearly experiencing a marked slowdown,” he said, adding that the latest figures were “overall still consistent with an economy experiencing a soft landing rather than plummeting into recession”.
The concerns about the economy are a key issue in the US election.
Polls suggest that a majority of Americans already believe the US is experiencing a recession, despite solid 2.5% growth last year.
Donald Trump has claimed that the economy is headed for a “crash” and his campaign quickly seized on the latest figures to attack vice president Kamala Harris, issuing a press release titled “warning lights flash as Kamala’s economy keeps weakening”.
Democrats have defended their record, arguing that the US weathered the pandemic and inflation better than many other countries.
They say that the slowdown is a sign of an economy returning to a more sustainable pace of growth after the post-pandemic boom.
“Although hiring has slowed, the US job market continues to generate solid job gains and wage growth that is consistently beating inflation,” the White House Council of Economic Advisors said in a blog.
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Table of Contents
- 1 Here are some potential “People Also Ask” (PAA) questions related to the title **”US Economy: Recession Fears Intensify Amid Weak Job Growth and Rising Interest Rates”**:
- 2 Here are some People Also Ask (PAA) related questions for the title **US Economy Adds 142,000 Jobs in August, Unemployment Rate Falls to 4.2%**:
US Economy: Recession Fears Intensify Amid Weak Job Growth and Rising Interest Rates
The latest job growth figures in the United States have sparked concerns about the economy’s ability to withstand the weight of higher interest rates. According to the Labor Department, employers added 142,000 jobs in August, falling short of the expected 160,000. This weak job growth has raised fears of a looming recession, with many analysts predicting a downturn in the economy.
The Federal Reserve, the US central bank, is under pressure to cut interest rates to prevent further economic slowing. However, the latest job figures have not provided a clear direction for the Fed’s decision, leaving many wondering what the next move will be. Seema Shah, chief global strategist at Principal Asset Management, believes that the Fed should err on the side of caution and frontload rate cuts, citing worrying signs in the data. Others, such as Paul Ashworth, chief North America economist for Capital Economics, think that the gains were steady enough to warrant a 0.25 percentage point cut.
The concerns about the economy are not limited to the Fed’s decision. The latest figures have also become a key issue in the US election, with polls suggesting that a majority of Americans already believe the US is experiencing a recession. Presidential candidates, including Donald Trump, have seized on the latest figures to attack their opponents, adding to the uncertainty and anxiety surrounding the economy.
Recession Fears: How Real Are They?
Several experts have weighed in on the possibility of a recession, with some predicting a downturn as early as next year. According to a report by the Bloomberg School of Public Health at Johns Hopkins University [[2]], converging global and domestic factors will cause the United States economy to experience a recession within the next 18 months. The report cites rising interest rates, a strong US dollar, and declining consumer confidence as contributing factors to the impending recession.
Another report by Simon Moore, contributor to Forbes, suggests that while a 2024 recession is generally seen as unlikely, metrics that economists take seriously hint that a recession could occur, perhaps in 2025 [[3]]. Moore cites the inverted yield curve, a reliable indicator of recessions, as a cause for concern.
The Federal Reserve’s Dilemma
The Federal Reserve is caught between a rock and a hard place. On one hand, it needs to cut interest rates to prevent further economic slowing. On the other hand, it risks fueling inflation by keeping rates too low for too long. The Fed’s decision will have far-reaching consequences for the economy, and it’s unclear what the next move will be.
Conclusion
The latest job growth figures have added to the uncertainty and anxiety surrounding the US economy. With recession fears intensifying, the Federal Reserve is under pressure to make a difficult decision. Whether it will choose to cut interest rates and risk fueling inflation or hold steady and risk further economic slowing remains to be seen. One thing is certain, however: the economy is at a critical juncture, and the next few months will be crucial in determining its direction.
References:
US Economy Adds 142,000 Jobs in August, Unemployment Rate Falls to 4.2%
The US economy added 142,000 jobs in August, falling short of expectations and raising concerns about a potential slowdown in the world’s largest economy. The unemployment rate, however, ticked down to 4.2% from 4.3% in July, according to the Bureau of Labor Statistics[[[1]]. The report comes at a critical time, with the Federal Reserve considering its first cut to interest rates in four years and voters weighing presidential candidates for the November election.
The job growth in August was weaker than expected, with employers adding fewer jobs than the roughly 160,000 analysts had forecast. The Labor Department also reported that job gains in the previous two months were lower than initially estimated. While the unemployment rate fell, the report highlighted concerns about the direction of the US economy and the potential impact of higher interest rates.
As reported by CNN, “‘The sky is not falling’: US economy added 142,000 jobs in August” [[2]]. The job gains, although below estimates, were higher than July’s worrisome low number, which was revised down from 104,000 to 94,000.
Soaring prices in 2022 prompted the Federal Reserve to raise its key lending rate to 5.3%, a roughly 20-year high. Faced with higher borrowing costs for homes, cars, and other debt, the economy has slowed, helping to ease pressures that were fueling inflation, but adding to market jitters. As inflation has subsided, falling to 2.9% in July, the Fed is now under pressure to cut rates and ward off further economic slowing.
Construction and healthcare firms led the hiring last month, while manufacturers and retailers got rid of roles. The job gains were mixed, with some economists arguing that the data warranted a bigger cut in interest rates, while others believed the gains were steady enough to warrant a 0.25 percentage point cut, as markets have long predicted.
The concerns about the economy are a key issue in the US election, with polls suggesting that a majority of Americans already believe the US is experiencing a recession, despite solid 2.5% growth last year. Donald Trump has claimed that the economy is headed for a “crash” and his campaign quickly seized on the latest figures to attack Vice President Kamala Harris.
The Federal Reserve’s decision on interest rates will be closely watched, with some economists predicting a 0.25 percentage point cut, while others believe the Fed should err on the side of caution and frontload rate cuts. As reported by The New York Times, “U.S. Jobs Report Shows Hiring Has Shifted Into Lower Gear” [[3]].
the latest jobs report highlights concerns about the direction of the US economy, with weaker-than-expected job growth and a slowdown in hiring. While the unemployment rate fell to 4.2%, the report raises questions about the potential impact of higher interest rates and the need for the Federal Reserve to cut rates to ward off further economic slowing. The economy will remain a key issue in the US election, with voters weighing the potential risks and benefits of different economic policies.