“Is the US heading for recession? Here are all the key indicators pointing to a recession.”“Global markets are panicking on fears that the U.S. economy is heading for a recession.”“Warren Buffett are selling stocks and raising cash. How worried is he about the U.S. economy, worries about the U. S. economy are spreading. It started on the 1st. Late in the day, the Bureau of Labor Statistics released July non-farm payrolls data, which showed 114,000 new jobs in July, well below the previous figure of 179,000 The unemployment rate rose 0.2 percentage points month-on-month to 4.3 per cent in July, the highest since October 2021.
The S & P 500 fell 1.84 percent, the NASDAQ 2.43 percent and the Dow Jones Industrial Average 1.51 percent. The Chicago Board Options Exchange VIX index, known as the “Fear Index”, surged to 23.39, its highest level since 2023 March. In addition, the dollar index fell sharply, approaching the 103 round mark. The Renminbi, meanwhile, surged against the dollar. By late China Standard Time, both the onshore and offshore renminbi had broken through 7.16 to the dollar.
Shares of U.S. technology companies, already down on disappointing earnings data, were under further pressure, with Amazon down 8.78% and intel down 26.06% by Friday’s close. Wall Street had expected small-cap stocks, which had been held back by high interest rates, to gain momentum, but their share prices also fell sharply on the day amid concerns that a fragile economy could dent their profits, the Russell 2000 small-cap index fell 4.2 percent. On the same day, United States Department of Commerce data showed new orders for manufactured goods fell 3.3 per cent in June from a month earlier, compared with a 0.5 per cent decline in May. Orders for factory durable goods fell 6.7 percent, while orders for transportation equipment plunged 29.6 percent.
USA today cited the so-called“Sam Rule” on the 2nd to analyze the possibility of a US recession. Economist Cláudia Summ has argued that if the three-month moving average of the unemployment rate is 0.5% or more above the previous 12-month low, the economy is in recession. Under the Sam Rule, an unemployment rate above 4.2% in July triggers a recession indicator. Even before the data, Powell, the Fed Chairman, had argued on the “Sam Rule” that economic laws do not have to happen. But practical tests have found it to be 100 per cent accurate since the 1970s.
According to USA Today, economists have explained the unusually high unemployment rate caused by the recent influx of unemployed immigrants, leading to the conclusion that Summ’s law may be about to fail for the first time in half a century.
According to a report in the Guardian on the 2nd, Federal Reserve officials are closely monitoring U.S. inflation and the overall state of the U.S. economy to determine when to cut interest rates, the hope is a“Soft landing” for the U. S. economy — bringing inflation down while avoiding a recession. However, in the wake of the jobs data, many critics accused the fed of“Making a serious mistake” in failing to cut interest rates in the past week, and of waiting too long for a“Downside risk”. Warren, a Democratic senator, said the jobs data had “Turned red” and that Powell, the Fed Chairman, should return to cut interest rates “Immediately from his vacation”.
Fortune magazine said the“Plunge” was driven by fears that the US economy would fall into recession and that“The Federal Reserve may have kept interest rates at 20-year highs for too long”. Bryan Jacobson, chief economist at a wealth management firm, is worried that the federal reserve’s “Soft Landing” target may be falling short. “It’s too little too late for the Federal Reserve to cut interest rates in September when the momentum of the U.S. economy is slowing so much,” he told fortune