Financial services titan JPMorgan Chase is reportedly warning that the US economy is flashing signs of an upcoming recession after a less-than-stellar July jobs report.
According to a new report from Fortune, the most recent jobs report sent a recession warning to traders and analysts on Wall Street.
Jobs grew by 73,000 last month, but fell short of the expected 100,000, while July and May job numbers had to be drastically revised downward, well below forecasted numbers.
In a note seen by Fortune, JPMorgan analysts say that the slowdown of hiring coupled with new US immigration policy is “a strong signal that business demand for labor has cooled,” meaning that a recession is likely.
“We have consistently emphasized that a slide in labor demand of this magnitude is a recession warning signal. Firms normally maintain hiring gains through growth downshifts they perceive as transitory. In episodes when labor demand slides with a growth downshift, it is often a precursor to retrenchment.”
The banking giant goes on to note that the weak job market, along with President Donald Trump’s tariffs, support its view that the Federal Reserve will soon loosen monetary policy.
“We think job creation is no longer appropriately described as solid. Together with building drags from the trade war, this week’s news supports our view that the Fed is moving closer to easing.”
Earlier this week, an executive from Goldman Sachs, another one of the biggest banks in the world, also warned of a weakening US economy and suggested the likelihood of rate cuts in September.
As stated by Goldman Sachs chief economist Jan Hatzius at the time,
“Weeks ago, we wrote a report with the title ‘Stall Speed.’ We have only a little more than 1% growth in GDP (gross domestic product) in the first half and with this jobs number, I think that brings the picture to clearly stall speed image.
I’m looking at an economy that is still growing but is growing very slowly. And the unemployment rate is drifting higher, gradually. But I do think that the downside risks in the labor market…. are definitely there.”
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