Investing.com – Without interest rate cuts from the Federal Reserve, a recession in the U.S. would be much more likely, Macquarie analysts warned in a note on Wednesday, citing increasing signs of labor market weakness seen in the latest consumer confidence report.
“We are not saying a recession is imminent, but without the Fed’s rate cuts, which will occur, a recession would be much more likely,” the analysts said, pointing to “worrying” signs of labor market weakness seen in the Conference Board’s consumer sentiment report released Tuesday.
The number of respondents saying there were plenty of jobs fell from 33.4% to 32.8%, while the number saying jobs were hard to come by rose to 16.4%. This “range,” which is very close to the unemployment rate, is now at its highest level since March 2021, when unemployment was 6.1%, according to Macquarie.
Analysts also pointed to other indicators, including a decline in the hiring and quit rates to levels last seen in 2015-2017, when unemployment was between 4.3% and 4.9%.
Signs of weakness in the labour market are likely to be reflected in the August employment report, which will be released on September 6, according to Macquarie, which could show a higher unemployment rate, possibly reaching 4.5 percent.
Concerns about the labor market outlook have increased bets on aggressive Fed rate cuts, with traders in swap markets pricing in a 99 basis point Fed rate cut between now and year-end.
This outlook contradicts the stance of the European Central Bank, which remains less dovish due to its sole mandate to control inflation.
