A recession is unlikely to hit the US economy in the next 12 months after Friday's hot jobs report
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- The odds of a recession in the next 12 months fell considerably after May's strong jobs report, DataTrek Research said.
- The May report showed that 339,000 jobs were added to the economy last month, well ahead of economist estimates.
- "History does support the idea that May's job growth pushes back the start of a US recession by at least 6 to 12 months," DataTrek said.
The US economy is unlikely to fall into a recession in the next six to 12 months following the Friday release of May's solid jobs report, according to a Monday note from DataTrek Research.
The May employment report showed that 339,000 jobs were added to the economy last month, well ahead of economist estimates of 195,000.
The strong jobs number, combined with no signs of incremental wage pressure and a slight increase in the unemployment rate, represented a goldilocks report for investors because it signaled that despite the solid jobs growth, the Fed could still hit the pause button on further rate hikes at its policy meeting next week.
The S&P 500 surged 1.5% on Friday while the Dow Jones Industrial Average surged 2% in reaction to the jobs report.
"The US labor market remains strong," DataTrek Research co-founder Nicholas Colas said, and that strength pushes off the likelihood of a recession that so many Wall Street strategists and business CEOs have been warning about in recent months.
Colas converted May's solid job growth into a percentage of the total US workforce to gauge what prior bouts of job strength said about a future recession, and the data is encouraging for stock market bulls who'd rather not see a recession happen anytime soon.
"History does support the idea that May's job growth pushed back the start of a US recession by at least six to 12 months. In no case since 1980 has the US economy slipped into a recession any sooner than that after a jobs report similar to what we got on Friday," Colas said.
The solid jobs report and its implications for the broader US economy could help explain why Wall Street's fear gauge fell to its lowest level since February 2020, right before the COVID-19 pandemic turned the economy and stock market upside down.
"As much as economic and market conditions certainly do not seem back to pre-pandemic normal, the VIX is signaling that they are closer than they may seem," Colas said.
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