Employers in the United States added 114,000 workers to their payrolls in July, the Department of Labor said Friday, and the unemployment rate jumped to 4.3 percent.
Economists had been expecting 180,000 jobs and an unemployment rate of 4.1 percent.
The disappointing payroll growth and the sudden jump in unemployment suggest that the economy may be heading into a recession.
The 4.3 percent unemployment rate brings the three-month average 50 basis points above the lowest three-month average over the past 12 months, a threshold known as the “Sahm Rule” that historically has indicated the beginning of a recession.
Fed chairman Jerome Powell on Wednesday said that while recessions have typically followed a triggering of the Sahm rule, a recession was not guaranteeed.
“It’s not like an economic rule, where it’s telling you something must happen,” he said.
Private payrolls grew by just 97,000.
Average hourly wages rose by 0.2 percent, below the 0.3 percent expected by economists. Compared with a year ago, average hourly earnings are up 3.6 percent, below the 3.8 percent gain recorded last month and the smallest year-over-year gain since May of 2021. The average workweek ticked down to 34.2 hours from 34.3 hours.
The worse-than-expected jobs numbers and lower-than-expected wage increase are likely to provide comfort to Fed officials who are considering cutting interest rates at the central bank’s September meeting.
Mohamad El-Erian of Queens’ College told Bloomberg TV that the “market now fully understands that the Fed may be late in starting its cutting cycle.”
