From CNBC: 2024-08-07 10:05:11

Stock market experienced sharp selloff on Monday due to recession fears, with S&P 500 posting 3% loss, weakest in almost two years. Weaker job data raised worries about Fed’s handling of soft landing. Despite high unemployment rate, recession odds remain low. Analysts expect Fed to cut interest rates to avoid downturn.

Unemployment rate rose to 4.3% in July, up from 4.1% in June and 3.5% a year earlier, triggering concerns of a recession. Sahm rule indicator suggests U.S. economy might already be in a recession. Goldman Sachs raised recession forecast to 25%. Chances of recession starting in the next year estimated at 30% to 40%.

Unemployment rate rise attributed to surge in labor supply, not weakening demand. Labor force grew by 420,000 people in July. Some signs of cooling in labor market, like slowing job hiring and increasing unemployment claims. Despite red flags, businesses are holding on to workers, indicating potential resilience of economy.

Economists see positive indicators in consumer spending that may counter recession fears. Real consumer spending remains strong, accounting for two-thirds of U.S. economy. Underlying economic fundamentals like household financial health are still robust. Fed expected to cut interest rates in September to support economy.

Read more: A ‘soft landing’ is still on the table, economists say