Ritika Janiya
The U.S. economy generated a meager 114,000 jobs in July, well below consensus expectations. Investigators and economists alike are at high levels of concern over these dismal figures. Unemployment has risen to the highest since 2021 at 4.3 percent. With these disappointing job numbers, expectations are ratcheted up for an imminent cutting of interest rates by the Federal Reserve to perk up the economy.
There is now a greater degree of certainty among investors that the Federal Reserve will have no alternative but to lower interest rates. Indeed, before the job report came out, the chance of such a significant rate cut was less certain. Now, the probability of a cut of at least 0.5 percentage points surged to 58.5 percent, as reflected in the CME’s FedWatch tool, which tracks market expectations for Federal Reserve actions.
These poor job numbers have seen investors sell off US stocks and buy safer investments like bonds. The Nasdaq stock index has entered correction territory; that means it’s fallen 10 percent from its recent peak. This has added to worries that the US might be heading toward a recession.
Economists are debating whether the Federal Reserve has made a mistake by not cutting interest rates sooner. This is especially significant because this is an election year for the US. High unemployment and a recession would be bad news for President Kamala Harris, who is running for re-election against Donald Trump.
In light of this job report, the Federal Reserve may need to cut interest rates more aggressively than planned,” said Ronald Temple, chief market strategist at Lazard, in an interview. He said the job report indicated a weakening in the US labor market.
Ian Shepherdson of Pantheon Macroeconomics was another economist who told NBC that the Federal Reserve made a mistake by not lowering interest rates this week. He believes the weak job numbers are a sign that the Federal Reserve is behind the curve in terms of pumping life into the economy. The slowing in job growth, he argues, is only going to continue, perhaps forcing more layoffs and therefore higher unemployment.
In a separate deal, Spanish energy company Iberdrola agreed to buy a majority stake in Electricity North West, valuing the group at £4.25 billion. The agreement will give Iberdrola control of the electricity network supplying 5 million customers in northwest England. It is part of its strategy for heavy investment in electricity networks integral for the transition to clean energy.
According to the Bank of England chief economist, Huw Pill, victory in the stock market over inflation is far from achieved. He said this as he was arguing against any further cut in interest rates, citing that the issue of inflation was still enormous.
Meanwhile, air traffic control delays forced Ryanair to scrap 650 flights last month. The iconic jet engines maker Rolls-Royce, which said it would give each of its workers £700 worth of shares as a windfall bonus on the back of a solid set of financial results, is considering cutting thousands of jobs.
There was also a mass sell-off in global stock markets, with investors spooked by the threat of a US recession. A lot of investors have placed their cash in more secure assets like gold, whose price has increased due to that.
In US politics, Kamala Harris’s campaign had raised $310 million, well ahead of Donald Trump’s fundraising. This is a major development amid a run-up to the US presidential election.
Other news: the US and Russia have exchanged prisoners. The Kremlin has confirmed that hitman Vadim Krasikov swapped worked for the Russian FSB security service.
In the Middle East, murdered Hamas leader Ismail Haniyeh was buried in Qatar. This has turned out to be a great news event in the region.
Team GB also won gold in equestrian at the Paris 2024 Olympics, while Ireland’s double sculls defended their title. In football, Morocco is beating USA in the men’s soccer quarterfinals.
Developments are closely watched in the business world that could have huge impacts on the economy and financial markets. Any kind of move from the Federal Reserve and other central banks will be keenly watched by investors and economists as they try to find their way through these challenging times.
Thanks for following our business live blog. We will continue to update these important stories as they further unfold.
