The recent weak jobs report for July has sparked concerns among investors, leading to speculation that the Federal Reserve's decision to maintain rates at a 23-year high may have been a mistake. However, economists and equity strategists believe that while the risks of a recession have increased due to weakening economic data, the market's response in the past few days has been an overreaction.

Apollo Global Management's chief economist, Torsten Sløk, cautioned that the market is "pricing in too many cuts" in response to the jobs report. Investors quickly adjusted their expectations, with some even suggesting that the Fed should consider cutting rates before its September meeting. Sløk advised investors to take these projections with a "grain of salt" given the volatile swings in market bets on Fed cuts.

One piece of evidence cited by Sløk to support his stance is consumer spending data. Despite concerns of a potential economic downturn, consumers are still actively spending on activities like flights, dining out, and hotel stays. Sløk argued that this indicates that the consumer sector is showing little signs of pulling back at this point, suggesting that a recession may not be imminent.

While the rise in the unemployment rate to 4.3% in the July jobs report was concerning, Deutsche Bank's senior US economist, Brett Ryan, believes that the labor market is being propped up by the lack of layoffs rather than strong hiring. Ryan noted that the rise in unemployment is primarily due to an increase in the labor supply, with more people either entering the workforce for the first time or returning to work. He emphasized that it is important not to overreact to a single data point.

Bank of America's US economist, Michael Gapen, shared a similar perspective, highlighting that without widespread layoffs, the case for a large emergency rate cut due to labor market dynamics is weaker than what the market is currently pricing. Gapen stated that while a rate cut in September is highly likely, the economy does not require aggressive, recession-sized cuts.

Some strategists view the market's sharp reaction to the weak jobs report as an opportunity for investors to be more aggressive in the stock market. The BlackRock Investment Institute believes that recession fears are "overblown" and predicts a recovery in risk assets as concerns ease and carry trades stabilize.

Seema Shah, chief global strategist at Principal Asset Management, echoed this sentiment and observed that the market rebound on Tuesday suggests that the economy concerns might not be as severe as initially anticipated. Shah emphasized that the macro story has not significantly changed, with expectations of a slowdown in the US economy but not a recession.

In conclusion, while concerns over a potential recession have heightened with the release of the weak July jobs report, economists and equity strategists argue that the market's reaction has been exaggerated. They point to factors such as continued consumer spending and the absence of widespread layoffs as evidence that the economy is not on the brink of a recession. However, they do acknowledge the need for a rate cut in September, albeit not as aggressively as some investors anticipate.