Unemployment data raise fears of a broader economic slowdown

by Tiffany Wang, WOO X Analyst

The market has exhibited a risk-off sentiment in recent weeks. As noted earlier, Bill Dudley, former president of the Federal Reserve Bank of New York, contends that the Fed needs to cut rates promptly.

Dudley's concern is rooted in the Sahm Rule, a historically reliable recession indicator. Recent Non-Farm Payroll (NFP) data revealed that job growth in the US slowed significantly in July, with the unemployment rate rising to 4.3%, its highest level since October 2021.

This uptick in unemployment raises fears of a broader economic slowdown, as higher unemployment reduces purchasing power, leading to lower revenues and potentially even higher unemployment—a self-reinforcing cycle. This suggests that the Fed could be lagging in its policy response. Following the report, stock market futures extended losses, exacerbated by weak earnings from major tech companies.

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