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Here’s why stocks fell after the latest strong jobs report

News last month that the U.S. economy Shrinking for the second consecutive quartermany doomsayers expect an official announcement of a recession to come soon.

However, the announcement was never made, proving that Identify recessions Yes More complex Rather than relying on the generally accepted definition of the second quarter. But that hasn’t stopped gloomy forecasters from predicting a recession. E.g: The world’s richest man said this weekagain, a recession is coming.

Another thing that happened today complicates the recession: The Bureau of Labor Statistics revealed that the economy created a lot of jobs last month, and Unemployment falls again.

But Wall Street doesn’t welcome good news for job seekers. Here’s an ebullient Main Street report that’s bad news for Wall Street, the latest chapter in a perpetual reminder that the stock market isn’t the economy.

Will job growth be bad?

The Bureau of Labor Statistics released its latest jobs report on Friday, showing the U.S. economy 528,000 new jobs added in Julybeat Analysts expect more modest growthMeanwhile, the unemployment rate fell to 3.5% — the highest level since shortly before the pandemic.

But for Wall Street, the strong job growth showed the Fed has not adequately reined in record inflation and suggested further rate hikes are likely this year.

“As [Federal Reserve] Chairman Jerome Powell and his colleagues continue to think the job market is hot, which is forcing them to keep raising interest rates,” Bankrate senior economist Mark Hamrick said in an interview with wealth.

Several major stock indexes fell rapidly on the jobs news.The S&P 500 fell 0.1%, while Nasdaq Its shares, which are more sensitive to rate hikes, fell 0.2%. Stock futures also slipped along with the report, suggesting investors expect prices to continue falling.

There are other signs of stress in the market. The yield on the 10-year U.S. government bond jumped to 2.85% after the jobs report, after closing at 2.67% on Thursday. But the yield on the two-year bond jumped to 3.24% from 3.04%. This means that the yield curve, the line that draws interest rates on government bonds, even more backwards than nowwhich is usually a signal of a recession.

Other economists agreed that the jobs report could be seen as a cause for concern because of its ties to inflation.

Comments shared by Eugenio Aleman, chief economist at financial firm Raymond James wealth. “This report is bad for the market because it means the Fed will have to continue to tighten policy to slow employment and economic growth.”

Inflation, which economists once hoped was temporary, turned out to be not at all. Hit a four-year high of 9.1% in Junehigh prices are distributed in different consumption areas.

As a result, the Fed has raised its benchmark interest rate several times. The first was 25 basis points in March, followed by a 50 basis point hike in May. in June and July, The bank implemented a 75 basis point rate hike – the largest since 1994. The Federal Open Market Committee, which meets to set monetary policy, no see in augustand will announce another potential rate hike in late September.

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