Skift Take

Unemployment is still at historically low levels and financial markets have only been selling off for a few days after strong gains. But the sentiment has shifted.

Sarah Kopit

After 15 years without a recession (ex-Covid), Friday’s jobs report has sent U.S. markets into a freefall and has a lot of people whispering the R-word. Here’s what’s going on and what it means for the travel industry.

So What Happened?! Everything Was Going So Well

A trifecta of bad economic news has roiled American markets, which are in the middle of a sell-off after a huge run earlier this summer. Here’s why:

On Friday, the Bureau of Labor Statistics put out its monthly report that showed the U.S. economy added only 114,000 jobs in July, a much lower number than expected. The unemployment rate ticked up to 4.3%.  That, coupled with the fear that the Federal Reserve has been too slow to cut interest rates has caused significant market volatility. And earnings season, which we are still in the middle of, has been full of so-so to poor results. And Today the Market Is?

A bloodbath. The S&P 500 is down roughly 8% from the peak hit just last month. The Nasdaq, more exposed to tech stocks, is down more than 12%. 

Our own Skift Travel 200 index hit a high in March and came close to that high again in mid-July. It’s down more than 13% since March.  

The selloff in the travel stocks began to accelerate at the end of last week, with a 4% drop for the ST 200 on Friday. This was the biggest decline in the ST 200 index since June 2022.  Booking Holdings was down more than 9% and Expedia Group and Airbnb both fell nearly 5%. Hotel groups were relatively less affected, with Hilton and Marriott down only around 2%. European hotel group Accor was down nearly 5%, after losing more than 15% last month. 

Why Do People Think This Might Cause a Recession?

Claudia Sahm, Chief Economist at New Century Advisors, said her “Sahm Rule,” an early warning sign of recessions, has been triggered by the increase in the unemployment rate. 

“We’re not in a recession. We are in a place where things have slowed,” Sahm said on CNBC Friday. “So we’re not in contraction territory. What is very worrisome - and today’s employment report underscored - is the direction of travel, the momentum is not good. We are pointing towards what would be recessionary dynamics.” 

What Does This Mean for the Travel Industry?

Since the pandemic, the travel i