The Labor Department said Friday that U.S. employers added 114,000 workers in July, helping push the unemployment rate up to 4.3%.
Economists had expected 180,000 jobs and an unemployment rate of 4.1%.
Disappointing employment growth and a sharp rise in the unemployment rate suggest the economy may be heading toward a recession.
The unemployment rate of 4.3% is 50 basis points above the lowest three-month average over the past 12 months, a benchmark known as the “thumb rule” that historically signals the start of a recession.
Federal Reserve Chairman Jerome Powell said Wednesday that while a recession typically occurs after the stimulus package is implemented, a recession is not guaranteed.
“This isn’t some kind of economic rule that says something has to happen,” he said.
Private sector payrolls increased by just 97,000.
Average hourly earnings rose 0.2%, below economists’ expectations of a 0.3% increase. Year-over-year earnings rose 3.6%, down from last month’s 3.8% increase and the smallest year-over-year increase since May 2021. Average weekly work hours fell to 34.2 hours from 34.3.
The weaker-than-expected jobs report and weaker-than-anticipated wage growth will provide reassurance to Fed officials as they consider cutting interest rates when the central bank meets in September.
“The market now fully understands that the Fed may be late in starting a rate-cutting cycle,” Mohammad El-Erian of Queens College told Bloomberg TV.
