The precautionary band hangs near the levels of the federal hall opposite the New York Stock Exchange in New York.
Michael Nagle | Bloomberg | Getty pictures
Although it may have been controversial, the July job report confirmed the idea that the US economic engine stuttered.
Low -agricultural salary statements only rose by 73,000 per month, even under the subdued expectations. The strong downward revision in the Count May and June took the three -month average employment to only 35,000 or less than a third of the pace for the same period a year ago.
Traditionally a delayed indicator of recessions, the weakness of employment growth indicates an economy that may slow down even more than some of the traditional metrics show.
“We are in a broad economic slowdown. Whether it leads to a recession or not is the question that I am now asking,” said Luke Tilley, chief economist at Wilmington Trust. “The job market is the key and it is difficult to judge what will happen.”
Wilmington has a 50% chance that the US recessions will slip into recession. Tilley quotes concerns about the long -term hits of tariffs that could depress consumer expenses that were used in the first quarter of 68% of all economic activities as well as business investments and settings.
In fact, he said that pressure from the tariffs was one of the reasons why the passage of President Donald Trump's taxes did not hit inflation as hard as many economists expected.
“If consumers owe the burden, they spend more for imports and will reduce the leisure spending, airlines, Disney trips, funny parks, hotels and all of this,” he said. “We saw this in the data, and that's why there are no inflationary effects.”
Reasons for optimism
Of course, the growth picture at this time is anything but bad.
The gross domestic product rose by 3% in the second quarter and provided a picture of a lively economy.
However, when they were viewed in the first half, GDP was only about 1.2% of growth, with consumer expenses hardly increasing by 1%. The main reason for the big leap in the second quarter was a reversal of the import shot in the first quarter when companies tried to be ahead of the tariffs. In the first quarter, growth fell by 0.5% in relation to imports that pull off from GDP calculation.
If the unemployment report in July means what will come, the picture is obliged to become darker.
“The most likely result is still a weaker economic growth in the second half of 2025 and early 2026 compared to 2024 and in the first half of this year, but no recession,” wrote Gus Faucher, chief economist at PNC, after the release of the jobs on Friday.
“But given the revised reading on the labor market, the recession risks are increased, and higher tariffs make this risk even higher,” he added. “It is easy to see how very weak employment growth and higher tariffs can lead to consumers reducing their expenses and companies to reduce their investment and bring the economy into a recession.”
Goldman Sachs predicts the growth of only 1% in the last two quarters, some of which are due to slower consumer expenses and a strong slowdown of real income growth [the fourth quarter] This was included in the latest financial laws. “
“The wage and salary account report on Friday brings the salary accounting growth closer to big data indicators for job gains and the broader growth data record, which have slowed themselves down in recent months. Together, the business data confirms our view that the US economy is growing at an entertaining person,” said the company in a note at the weekend in a note.
Despite the cloudy prospects, officials from the White House exist that the economy is solid and will only get better if Trumps starts a big beautiful Bill Act.
Trump himself crowded against the July job report and released the Bureau of Labor Statistics, Erika Mcentarfer, the numbers “Faked” and “manipulated” in a social post of truth on Friday.
The economist of the White House, Kevin Hassett, said CNBC on Monday that the revisions were worrying, even when he also addressed broader economic strength.
“There are many really good reasons to be super optimistic about the second half of the year. But absolutely these jobs, when it turns out that the revision is true, indicates that there is less swing than we thought,” said Hassett, director of the National Economic Council, who is considered a leading place in the Federal Reserve Board of the GOVERNERS.
View of the Fed
The Trump administration officers called on the Fed to lower their benchmark funds, which flows into several other consumer interest. The Fed last week kept the interest rate, and several officials have made public comments since the report that they still believe that the labor market is strong.
However, further signs of an economic weakness could change.
The apartment data has recently been bad, which is due to a falling level of buyers as well as rising prices and persistent high mortgage interest.
“What do we do with a national average 30-year mortgage in 7% in an economy that is still almost 7% in 1%?” The experienced economist and strategist Jim Paulsen wrote in a substance post. “There is nothing” healthy or solid “on this [economic] Numbers, they are far below the 2% stable speed and call for help. “
Other economists repeated this feeling.
“For me, today's job report is how it is in a recession,” Josh Bivens, chief economist at the Economic Policy Institute, a left-wing think tank, wrote after the Friday report.
“The economy is on the abyss of the recession. This is the clear snack from the economic data of the past week,” published Mark Zandi, chief economist at Moody's Analytics, on Sunday on X.
Monday bought more bad news, whereby the factory orders fell 4.8%, actually a touch of less than the estimate by Dow Jones, although the worst reading since January 2024.
The markets were resilient
In the middle of the worrying economic signs, the shares did not fall dramatically. The Wall Street gathered on Monday with the hope that the United States and the European Union can achieve a long -term collective agreement.
The trade has recently become volatile, with the Dow Jones Industrial Average triggered 1.7% last month.
“This confirmed many of our suspicions. To be honest, we waited for the other shoe to drop, and now we are starting to drop a few shoes,” said George Mateyo, Chief Investment Officer at Key Private Bank.
Recently, trade has seen “a lot of complacency” when investors largely ignored the political storms in Washington and have taken a view of the best case scenario towards the economy, Mateyo added.
“Many people expected the fact that the good times would continue to roll, and in fact they will probably do it,” he added. “We still don't believe that the case of the basis is that a recession will manifest itself. But it becomes a rather big slowdown because the uncertainty is really high.”
The markets also fluctuated in terms of what they do the Fed.
Shortly before the job report, the dealers made low chances of winning at the September meeting of the central bank and, according to the CME group, resisted a probability of almost 90% on Monday. Until then, however, there are several important data publications, and the fed rhetoric was lukewarm in terms of loosening.
Mateyo sees the economic and political uncertainty into a recipe for caution.
“We have warned customers to check their general risk exposure and possibly reduce some of the risky market sectors,” he said.
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