As markets continue to shake off last week’s surprise downtrend, analysts everywhere are concerned a weak U.S. jobs report tomorrow may trigger a stock market crash.
According to preliminary projections, jobs may come in well below expectations on Thursday. Indeed, ADP’s national employment report, released Wednesday, showed that private sector employers, in particular, slowed hirings significantly in September. ADP reported that private jobs increased by just 89,000 in the ninth month of the year, undercutting Dow Jones’ 160,000 jobs estimate.
Though not everyone agrees, this is cause for concern.
“The labor market still is solid,” Nela Richardson, chief economist at ADP, told CNN. “It’s slowing, but there is no indication that it’s breaking.”
As it stands, economists predict that the U.S. added 170,000 jobs last month, well below the 187,000 added jobs recorded in August. Interestingly, the unemployment rate is estimated to inch down to 3.7% from 3.8%.
If you recall, the unemployment rate jumped 0.3% in August, from 3.5% to 3.8%, the highest level since March 2022. This fueled speculation that the U.S. is on track to an imminent recession, in no small part due to the Federal Reserve’s restrictive monetary policy.
However, hopes still remain that the Fed can pull off a quote “soft landing,” an economic outcome where inflation eases without sending the economy into a downturn.
“Things are no longer ‘frothy’ as they were in 2021 and 2022,” said Nick Bunker, head of economic research at the Indeed Hiring Lab. “We’re in a moderation, not a deterioration.”
Also worth noting, despite the various labor strikes going on across the country, namely the 25,000-person United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) strike at Detroit’s “Big Three” automakers, most economists agree the impact of the workforce retaliation will be mostly unfelt in tomorrow’s report.
Will Tomorrow’s Jobs Report Spark a Stock Market Crash?
With the Fed still actively attempting to slow down the economy as part of its campaign against inflation, economists are split on how to read tomorrow’s jobs report.
On one end, slowing jobs means the economy is feeling the effects of the Fed’s aggressive rate-hike campaign. With that, inflation is likely to fall, reducing the likelihood of further rate hikes.
On the other end, the notion of rising unemployment is sure to further validate recession concerns many economists have long held.
In that regard, it’s unclear just how the Fed and the stock market will interpret tomorrow’s data release. However, early indicators suggest traders are already feeling bearish.
Despite signs of life Wednesday, a clear reaction to a bearish couple of weeks, stocks are back in the red today.
Indeed, the
S&P 500 is down about 0.8% heading into the afternoon, while the Nasdaq Composite has already sunk more than 1%. Both indices have lost more than 5% over the past month, though are in the green for the year.
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.
