It would seem that after the August the fall of the US stock market the situation has relatively stabilized. However, the prerequisites for the expected recession still have not gone away.
Labor market situation
The shrinking workforce in the United States suggests that an economic downturn may be on the horizon. According to BCA Research in its statement released on Monday, this opinion is not generally accepted, as most investors believe that the economy is simply slowing down and a recession will be avoided.
In a new strategic analysis, BCA Research highlights that the labor market has shown significant signs of weakening in recent months, which forced the company to take a cautious stance just four weeks ago.
Data analysis
"Since the end of World War II, there has not been a single case in which the average three-month unemployment rate has increased by more than 0.35 percentage points without an accompanying economic downturn," BCA Research experts note.
The analysis of the labor market revealed several alarming trends. Firstly, the willingness of small businesses to hire new employees has decreased. Secondly, the number of temporary jobs remains extremely limited, and the number of new applications for unemployment benefits is growing.
These factors, combined with a consistent decline in key indicators from the JOLTS report (Open Vacancies and staff turnover), have pushed BCA Research to a potentially negative assessment of the stock since the beginning of August.
Recommendations for investors
"We adopted a cautious tactical position four weeks ago, as there are significant signs of weakening in the labor market, which may portend a recession. Investors should use the market recovery from August 5 to reduce their investments in risky assets," the report says.
BCA Research also emphasizes that consumer spending is unlikely to be able to keep the economy afloat the way it did during the health crisis.
Although households still have a certain level of financial flexibility to spend due to accumulated savings made during the pandemic, analysts warn that "their ability and willingness to spend have their limits."
This article was prepared with the assistance of AI and verified by the editor.
