Recession Fears Continue to Rock Markets Even as June Jobs Report Draws Nearer

Investors and market observers continue to show fears of a likely recession even as the jobs report for June draws near. In fact, given the current situation, the forthcoming June jobs report has taken on an even bigger significance. The jobs reports, as well as published minutes from the Federal Reserve’s last interest rate meeting, could potentially define the week ahead.

Jobs Expected to Diminish for the Month as Recession Continues to Loom Large

In the face of a menacing recession, expectations are rife that the incoming jobs report will reveal a reduction in employment data. According to economists, June’s nonfarm payrolls saw an additional 250,000 jobs. However, this figure is still some way off the 390,000 jobs added in May. Notwithstanding, analysts believe that the nonfarm payrolls clearly show solid job growth and a strong labor market. According to Dow Jones Industrial Average (INDEXDJX: .DJI), the unemployment rate is still expected to hold steady at 3.6%.

Speaking on the incoming jobs report, David Page, head of macroeconomic research at AXA Investment Managers, explained:

“Employment should slow from May. Whether it goes to 250,000 consensus or more, there’s always volatility. The trend is going to be lower, and I wouldn’t mind betting it would be in 150,000 to 200,000 by early Q3, and it could be certainly lower by the end of the year.”

Fed Actions Pivotal in Determining Market State

The main reason there is a general consensus on slowing employment data is the Fed’s tighter rates policy. This is because the US central bank has been systematically hiking interest rates to stem rising inflation. As a result, such policy squeezes could continue to impact employers and the broader economy at large. Also commenting on this development, Page offered:

“That’s part of a trend we’re seeing emerge. It’s very evidently a slowdown in the economy. The warning signs are starting to emerge, and the more we see those warning signs start to trickle into the labor market, the more the Federal Reserve is going to have to take heed and that’s what puts such focus on next Friday’s payroll report.”

Furthermore, there is also an indication that a sound jobs report could adversely trigger the markets. This could be so because the Fed might feel compelled to further tackle inflation with even larger rate hikes.

As it stands, several economists opine that the US central bank would likely raise interest rates by another 75 basis points. They also believe this could occur as early as its next policy meeting slated for late July.

Conversely, economists remain divided on the state of the economy’s trajectory towards a recession. Although the markets are increasingly pricing towards an economic contraction, Page is not swayed by this. According to him, a recession does not seem likely any time soon. In fact, the AXA Investment Managers chief economist optimistically forecasts a growth of 1.5% in the second quarter.

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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.