At the end of trading on Monday, global and Arab stock market indices continued their decline amid rising fears of a potential recession in the United States following weak economic data, along with increasing concerns over the Federal Reserve's delayed intervention to support the economy by lowering interest rates, disappointing earnings results from major companies, and heightened geopolitical tensions. According to the Wall Street Journal, worries about a slowdown in the U.S. economy are taking center stage after a sharp deceleration in job growth in July. Investors are concerned that the Federal Reserve is moving too slowly and will need to catch up on interest rate cuts.
U.S. job creation slowed more than expected, with the unemployment rate rising to its highest level since late 2021, according to government data published on Friday, amid calls for interest rate cuts. The largest economy in the world created 114,000 jobs last month, a significant decline compared to the 179,000 jobs added in June, according to the Labor Department. The unemployment rate rose to 4.3%, the highest since October 2021, according to government data. Based on this data, a sudden wave of global panic started overnight on Sunday, leading to declines in stocks, currencies, and even cryptocurrencies, raising the possibility of a broader slowdown ahead, according to the Washington Post.
What do economic experts say? Regarding the sudden turn, economists and financial analysts say that the stock market decline is not a definitive sign that a recession is imminent, and they believe it is too early to panic, as reported by the American newspaper. Experts think that the current sell-off is a result of investors needing to unwind complex high-leverage trades that artificially inflated stock values. According to the newspaper, the U.S. economy remains strong by most metrics, as "Americans continue to spend, the services sector is growing, and the stock market has remained high throughout the year, not far from its recent all-time highs." The Federal Reserve left borrowing costs unchanged last week, stating it needs more evidence that inflation is reliably under control. Many expect the Federal Reserve to begin cutting interest rates at its next meeting.
