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Over recent days, global stock markets have experienced a sharp decline, with trading screens across the US, Asia, and Europe displaying a sea of red. This sudden downturn is attributed to growing concerns about a potential slowdown in the US economy, the world's largest.
The source of these fears stems from disappointing US jobs data for July, released on Friday. According to the official figures, US employers added 114,000 jobs in July, falling short of the anticipated 175,000 new positions. Additionally, the unemployment rate increased to 4.3%, approaching a near three-year high. This rise triggered the "Sahm rule," named after economist Claudia Sahm, which suggests that if the average unemployment rate over three months exceeds the lowest level of the past year by half a percentage point, the economy may be entering a recession.
Further compounding concerns, the US Federal Reserve decided last week to maintain current interest rates, unlike other central banks such as the Bank of England and the European Central Bank, which have recently lowered rates. Federal Reserve Chair Jerome Powell indicated that a rate cut could be considered in September, but this has led to speculation that the Fed may have been slow to act. A reduction in interest rates typically aims to stimulate economic activity by making borrowing cheaper, but if economic indicators are already pointing downward, delays in action could be problematic.
Adding to the unease are developments in the technology sector. The Nasdaq, a technology-heavy index, suffered a significant decline following Intel's announcement of 15,000 job cuts and market rumors suggesting potential delays in Nvidia's new AI chip release. This led to a 10% drop in the Nasdaq on Friday, exacerbating market fears.
If the stock market volatility persists and the decline deepens, the Federal Reserve may consider intervening before its next scheduled meeting in September. Neil Shearing, group chief economist at Capital Economics, suggested that such intervention could occur if the market dislocation threatens financial stability or systemically important institutions.
