After difficult times for stocks, here’s the current state of the stock market and the economy
When global markets experience significant declines, as seen last week, investors can feel anxious, and retirement accounts may suffer. But should we really be concerned about the economy’s direction? Various other indicators suggest we might not need to worry too much.
After three days of losses, including a steep decline last Monday, the three major U.S. indexes displayed volatility throughout the week:
â—¾ Tuesday: They bounced back.
â—¾ Wednesday: They fell again despite a strong start.
â—¾ Thursday and Friday: They rose into positive territory but didn’t completely recover from Monday’s dips.
These fluctuations may indicate a disconnect between the future that investors envision and the one that economists predict. The upcoming inflation report for July, set to release Wednesday morning, could be a significant factor.
The turning point for investor optimism arrived on August 2, when the Department of Labor announced that the U.S. economy had added fewer jobs in July than anticipated, causing the unemployment rate to rise to 4.3%.
This unemployment rate has increased each month in 2024 except February. However, job creation continued in July, and the overall jobless rate is still considered historically low.
Unemployment rate exceeds the 10-year average
The recent turbulence in the global stock markets stems from a wide array of issues beyond just a disappointing jobs report. Could July’s job data heighten recession fears? There’s a possibility. Nevertheless, other indicators do not suggest a recession is imminent.
According to Oxford Economics, an independent economic consultancy, “Concerns about the economy’s health have surged recently,” as stated in its Recession Monitor. “We believe this response has been an overreaction to what has been a gradual deterioration in economic indicators.”
The Oxford Economics index dipped in its July forecast, suggesting a heightened chance of recession, but the firm emphasized, “The odds are still below the historical level that usually indicates a recession and lower than they were last year.”
A recent report from Zeta Global, which leverages artificial intelligence for marketing analytics, indicates that while the job market is softening, the overall economy remains robust.
Zeta Global tracks the online behaviors of 240 million Americans. Among the countless data points its AI analyzes, it appears that potential job seekers are facing difficulty in securing employment.
“A slight decrease in job market sentiment, alongside a slowdown in specific sectors, indicates that future economic growth may be inconsistent,” stated Zeta Global CEO David A. Steinberg. Despite the decline in job sentiment, the company’s overall economic measure, the Zeta Economic Index, continues to rise.
Overview of economic health since 2020 via the Zeta Economic Index
Additional indicators confirm the U.S. economy’s strength
Zeta Global’s insights align with more conventional economic metrics:
â—¾ Surprises in gross domestic product: The Commerce Department revealed in late July that the U.S. produced goods and services worth 2.8% more in the second quarter, which is double the growth rate observed in the first quarter and nearly a full percentage point above predictions.
â—¾ Increase in consumer confidence: Although the Consumer Confidence Index is still far from its peak set a decade ago, it showed a slight uptick to 100 in July. “Despite a positive outlook on the job market, consumers still seem worried about high prices and rising interest rates,” noted Dana M. Peterson, chief economist at The Conference Board.
â—¾ Growth in the service sector: The service sector, which constitutes about 70% of the GDP, reported growth for the 47th time in the past 50 months, according to the Institute for Supply Management’s Monday report.
Indicators of ongoing economic growth
Most traditional economic measures reflect past performance and do not necessarily predict the future. However, consumer confidence provides insights into American sentiments, which could influence their spending behavior and employment decisions.
“Relative to last month, consumers show slightly less pessimism about what lies ahead,” Peterson observed. “Future income expectations have improved slightly, yet consumers remain generally negative about future business and employment conditions.”
Consumers seem ready to stimulate the economy through spending
Zeta Global’s metrics are based on analyzing consumer online activities, reflecting that consumers account for almost 70% of U.S. economic spending. The data from July indicates that consumers plan to boost their spending in the coming weeks while also increasing debt levels.
