Investors remain concerned about a stock market crash ahead of the next make-or-break jobs report. Indeed, with investor sentiment reaching new highs, a less-than-stellar jobs report could mean the difference between a bull and bear market in the latter half of 2023.

The importance of next month’s jobs report, due Aug. 4, lies in the strength of the U.S. economy thus far. To say things have gone well this year would be a gross understatement.

Despite the Federal Reserve’s relentless rate-hike campaign over the past year and a half, the economy hasn’t slowed down much. Gross domestic product (GDP) came in at 2.4% in the second quarter of the year, far beyond even the loftiest projections, including the average 1.5% expected growth. This was boosted by consumer spending which has remained robust even with interest rates between 5.25%-5.5%, the highest level in more than 22 years.

“Overall, while the acceleration in second-quarter GDP growth would seem to make a mockery of forecasts (including ours) that the economy is headed for recession,” wrote Capital Economics analysts.

Even equity markets have enjoyed tremendous years so far. The S&P 500 and tech-heavy Nasdaq Composite are up 20% and 37%, respectively, heading into the latter half of the year. That’s growth reminiscent of the strongest bull market in modern memory.

Stock Market Crash Alert: Are We in the Middle of a Soft Landing?

At the same time, inflation, which has been the primary target underlying the Fed’s monetary changes, has seen shocking improvements over the past year.

According to the Personal Consumption Expenditures (PCE) price index, the Fed-preferred inflation gauge, prices increased just 0.2% month-over-month in June. This represents 3% annual inflation, the smallest yearly gain since March 2021.

It’s also an unbelievable improvement from last June’s PCE reading of 7%, the highest level in 40 years.

“The inflation outbreak is winding down quicker and with less pain for the labor markets than economists could have imagined just a year ago,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

The economy’s resilience has prompted some economists, including Fed Chair Jerome Powell, to seriously consider the possibility of a “soft landing.” That is, the idea that the U.S. could ease stimulus-induced inflation without spurring on an outright recession.

In fact, at last week’s Federal Open Market Committee (FOMC) meeting, Powell surprised economists by pointing out that Fed economists no longer project a recession starting later this year, as has been the base case for most of the past year.

“So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession,” Powell said.

July Jobs Report Will Set the Tone for Q4

The jobs market is at the heart of the Fed’s regained optimism. Indeed, most recession predictions have been based on the premise that U.S. unemployment will inevitably deteriorate. Yet, so far, it’s only been the opposite.

As per the June jobs report, released earlier this month, the country added 209,000 jobs in the sixth month of the year, bringing unemployment from 3.7% to 3.6%. Not only is this nearly the lowest level in half a century, it has proven the most robust evidence of a soft landing in-progress.

“The labor market, I think, has surprised many, if not all, analysts over the last couple of years with its extraordinary resilience,” Powell said.

The July jobs report, due next week, will be important. Like the groundhog’s shadow, the results of the unemployment gauge may precede several more strong months of growth or prove a “black swan,” indicating a recession is already starting.

Now, as Powell reiterated repeatedly last week, the fight isn’t finished. As nice as 3% inflation seems given last year’s price growth readings, it is still a ways away from the Fed’s 2% goal.

Powell has even hinted at another rate hike this year. This would represent the central bank’s 12th rate increase this cycle, an unprecedented measure in modern times.

Economists are expecting the U.S. to have added 200,000 jobs in July, close to the 209,000 jobs from last month. Depending on the results, the report may validate soft landing rumors or set expectations for a stock market crash ahead.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.