As a turbulent week for stock markets draws to a close, one US economist has warned that this could just be the beginning of a “liquidation”.
“There’s a lot of pain ahead for both the economy and for the markets, which have really been laggards, like the Fed,” MacroMarvens President Stephanie Pomboy said on “Mornings with Maria” Thursday.
“People believe that inflation is more likely to outpace incomes than it was during the Great Recession when unemployment was at 10 percent,” she added. “So they have to wait until the employment situation improves.”
A sell-off in global stock markets on Monday saw the Dow Jones Industrial Average fall 2.6%, the Nasdaq Composite fall 3.43% and the S&P 500 fall 3%, but Thursday’s release of jobless claims numbers eased some fears of an economic recession.
Initial jobless claims fell by 17,000 to 233,000 for the week ended Aug. 3, according to figures released by the Labor Department on Thursday, below the 240,000 forecast by economists polled by Refinitiv but higher than the pre-pandemic 2019 average of 218,000.
“The Midwest has been in a recession for a long time, and again, Wall Street has been ignoring that, but I think it’s starting to catch up now,” Pomboy responded. “And the jobs report has caught Wall Street’s attention in a way that they can no longer ignore.”
“Obviously the employment number is going to be extremely important, and then of course next week we’ll have inflation numbers and retail sales numbers which will be key indicators of the consumer outlook,” she continued.
Continuing claims for unemployment insurance, those Americans who are continuing to receive unemployment benefits, reached 1.87 million in the week ended July 27, up 6,000 from the previous week. This is the highest level of continuing claims since November 2021.
The female CEO of Macromarvens noted that investors aren’t sure what the market wants at the moment.
“I think this is indicative of the direction we’re heading, the data, and it should be a situation where the market is wagging its tail, and rightfully so,” Pomboy said. “There’s clear evidence that the consumer is in a recession, and I think Wall Street is just finally starting to wake up to it.”
