Investors Look to Jobs Data as Economic Hopes GrowInvestorsLooktoJobsDataasEconomicHopesGrow

The US jobs report on Friday will come as market participants grow increasingly optimistic of a soft landing for the economy, a sentiment that has propelled risk assets and helped the S&P 500 to its fifth consecutive monthly gain in July. Economists expect that hiring decelerated again last month, predicting a gain of 200,000 jobs. The US added 209,000 jobs in June, the lowest monthly figure since December 2019. A report from payroll processor ADP on Wednesday revealed that leisure and hospitality businesses continued to drive growth in private-sector employment, which rose by 324,000 in July to eclipse the consensus estimate of 175,000. While a slowdown in hiring and a projected drop in corporate earnings might demonstrate weaker economic activity, jobs growth remains historically solid, and softer data on employment and wages may be viewed as a positive development in the fight against inflation. Meanwhile, Fitch stripped the US of its top credit rating and downgraded the nation’s debt by one notch to AA+, adding a new layer of uncertainty to the outlook.

In a survey from PGIM Investments’ Strategic Investment Research Group, investment managers said they viewed a recession as less likely, although the odds were still elevated. According to the Investment Manager Pulse, 57% of respondents predicted that the Fed’s tightening cycle will end in a recession, down from 73% in December, and 81% expected core inflation to fall over the next 12 months. The survey also showed that market participants remained cautious on US equities, while sentiment towards fixed income had improved with higher rates.