Nearing the end of a wild week for the stock market, one U.S. economist cautioned this may be just the beginning of a “reckoning.”
“There’s a lot of pain ahead of us, both for the economy and this reckoning for the markets that have been really behind the curve, like the Fed,” Macromavens President Stephanie Pomboy said Thursday on “Mornings with Maria.”
“People view the likelihood that inflation will outstrip their income as higher today than they did when the unemployment rate was 10% at the depths of the global financial crisis,” she added. “So wait till the employment shoe drops.”
Following a global market sell-off on Monday — which caused the Dow to plunge 2.6%, Nasdaq Composite 3.43% and S&P 500 3% — the jobless claims report out Thursday eased some concerns of a downturn.
Figures released Thursday by the Labor Department show initial claims for the week ended Aug. 3 fell by 17,000 to 233,000, below the 240,000 estimate by Refinitiv economists. However, that remains higher than the 2019 pre-pandemic average of 218,000 claims.
“Middle America has been in recession for a long time. And again, Wall Street has kind of ignored it. But I think that’s all starting to catch up now,” Pomboy reacted. “And the payroll report really focused attention in a way that Wall Street could no longer ignore.”
“Clearly, the employment data is going to be crucial. And then, of course, next week we get inflation measures as well as retail sales, which will be key as relates to the outlook for the consumer,” she continued.
Continuing jobless claims, filed by Americans who are consecutively receiving unemployment benefits, hit 1.87 million for the week ended July 27, up 6,000 from the previous week. It marks the highest level for continuing claims since November 2021.
Investors aren’t really sure what they want at this point in the market, the Macromavens matriarch noted.
“I think this is indicative of what we’re heading into, which is the data. It’s going to be the tail wagging the market dog, as it should be,” Pomboy said. “I really think there’s clear evidence there’s consumers in recession, and Wall Street is just finally coming to grips with that.”
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