Is the US headed for a recession?
Al Jazeera
The latest unemployment data will play into the upcoming US presidential elections and any weakness will hurt the incumbent.
The unexpected rise in the unemployment rate in the United States has left economists divided: Is the US on the brink of a recession or not?
The unemployment rate jumped to a nearly three-year high of 4.3 percent in July, as per data released Friday. The increase – up from 4.1 percent in June, and up from a five-decade low of 3.4 percent in April last year – sets the stage, more than ever, for a cut in interest rates in the next Federal Reserve meeting in September.
Which raises the question: Is it too late?
The jump in the unemployment rate “points to a recession in 2025”, Gary Clyde Hufbauer, nonresident senior fellow at the Peterson Institute for International Economics, told Al Jazeera. “I’m expecting the [US] Fed to start cutting the policy rate in September, and to continue cutting in subsequent meetings. That response will probably ensure a shallow recession,” he added.
The equity markets, too, reacted in fear of a recession. The Dow Jones average tumbled more than 700 points – almost 2 percent – in afternoon trading Friday, and the broader S&P 500 fell 2 percent, with Wall Street banks calling for bigger and more rate cuts than had been expected so far.
