When world markets fall with big red numbers like they did Monday, investors are shaken and 401(k)s are dented. Should that have us on edge about the direction of the economy? Several other numbers say probably not.
Following three days of losses, including Monday’s sell-off, the three major U.S. indexes regained ground Tuesday. The tech-heavy Nasdaq and S&P 500 rose just over 1% while the Dow Jones industrial average improved 0.76%.
The economic news that put a crack in investor confidence came Friday morning when the Department of Labor reported the U.S. economy created fewer jobs in July than expected and the unemployment rate rose to 4.3%.
The unemployment rate has ticked up in every month of 2024 except February. Still, the economy created jobs in July and the jobless rate remains historically low.
Unemployment rate rises above 10-year median
What’s left is a mixed bag. The issues pushing the world’s stock markets down in recent days are much more varied and complex than just a disappointing jobs report. Could Friday’s jobs numbers raise the risk of a recession? Possibly. But other data points aren’t trending that way.
A new report released Tuesday by Zeta Global, an artificial intelligence-powered marketing cloud, suggests the job market is softening but the overall economy appears strong.
Zeta Global monitors the anonymized online behaviors of 240 million Americans. Perhaps among the trillions of data points analyzed by the company’s AI system, prospective employees are lamenting the challenges of landing a job.
“A slight decline in job market sentiment and a slowdown in particular sectors suggests that further economic expansion will be uneven,” Zeta Global CEO David A. Steinberg said. Even with the job sentiment decline in July, the company’s overall measure of the economy’s strength – the Zeta Economic Index – continues to rise.
The economy’s health since 2020 based on the Zeta Economic Index
Other measures show US economy remains strong
Zeta Global’s findings square with more traditional economic measures:
– Gross domestic product surprises: The Commerce Department reported in late July that the value of goods and services produced in the U.S. during the second jumped 2.8%. That was double the first quarter’s growth and almost a full percentage point stronger than forecasts.
– Consumer confidence rises: The Consumer Confidence Index remains well below its 10-year highs, but the index turned up a couple of points in July to 100. „Even though consumers remain relatively positive about the labor market, they still appear to be concerned about elevated prices and interest rates,“ Dana M. Peterson, chief economist at The Conference Board wrote.
– Service industry grows: Service-based industries make up 70% of GDP. Those industries grew in July for the 47th time in 50 months, the Institute for Supply Management reported Monday.
Signs of continued economic growth in the future
Most traditional measures, though, tell us what’s happened and don’t necessarily signal what’s ahead. Consumer confidence gives us a sense of what’s on Americans‘ minds, which could affect their spending or employment plans.
„Compared to last month, consumers were somewhat less pessimistic about the future,“ Peterson wrote. „Expectations for future income improved slightly, but consumers remained generally negative about business and employment conditions ahead.“
Consumers appear primed to buoy economy with their spending
Zeta Global’s indexes rely on collecting and analyzing the online actions of consumers, who account for almost 70 cents of every dollar spent in the U.S. economy. The July data suggest that we plan to increase our purchases in the coming weeks while taking on more debt.
In conclusion, while the recent dip in the stock market may have caused some concern, it is important to look at a variety of economic indicators to get a full picture of the state of the economy. While there may be some softening in the job market, other factors such as GDP growth, consumer confidence, and the strength of the service industry point to continued economic growth. It is always important to stay informed and not make rash decisions based on short-term market fluctuations.