Fears of recession cause turmoil in markets

Global markets are in turmoil because of the fear of an impending recession in the global market. About 60 per cent Americans themselves believe that but they do it erroneously, says recent research.

The biggest reason cited for that belief by respondents in the survey, which was sponsored by buy now, pay later company Affirm (AFRM), was inflation and cost of living, said a report in investopedia.com. “Respondents also pointed to complaints from friends and family about money, as well as friends cutting down on spending or falling behind on credit card debt.”

According to experts, the main reason for this fear is that US jobs data for July was much worse than expected. While 114,000 jobs were created in July, the expectation was 175,000.

“The rate of unemployment also rose to 4.3 per cent, a near three-year high, which triggered something known as the Sahm rule’.” BBC reported. “Named after American economist Claudia Sahm, the rule says if the average unemployment rate over three months is half a percentage point higher than the lowest level over the past 12 months then the country is at the beginning of a recession.”

However, Sahm herself, inventor of the rule, said, “We are not in a recession now.” She told CNBC, “A recession is not inevitable and there is substantial scope to reduce interest rates.”

The quarterly US unemployment rate rose to 4.1 per cent. “That compares to the lowest level over the last year which was 3.5 per cent. Adding to these concerns was the fact that the US Federal Reserve voted last week not to cut interest rates,” the BBC report said.

Other central banks within developed economies, including the Bank of England and the European Central Bank, have recently cut interest rates, it said.