The following is a report from the Associated Press.
The U.S. economy suffered an unexpected setback in July, as hiring fell sharply and the unemployment rate rose for the fourth straight month as sustained higher interest rates take a toll on businesses and consumers.
Friday’s report from the Labor Department showed that employers added just 114,000 jobs in July — 35% fewer than forecasters had expected — and that unemployment, now up to 4.3%, is the highest since October 2021.
“Things are deteriorating quickly,” said Julia Pollak, chief economist at the job marketplace ZipRecruiter. The news shook financial markets around the world.
The sturdiness of the U.S. economy — the world’s largest — has been a key driver of global economic growth and the U.S. jobs market is a big reason for it, underpinning the American expansion and giving consumers the confidence and financial wherewithal to keep spending.
The unemployment rate’s jump to 4.3% in July crossed a tripwire that historically has signaled that the United States is in recession — though economists say the gauge probably is not reliable in the topsy-turvy post-pandemic economy.
Hiring may have been disrupted by Hurricane Beryl, which slammed the Texas economy last month. And ZipRecruiter’s Pollak noted that employers have cut workers’ hours and put some on temporary layoffs — perhaps signaling that they are optimistic that Fed rate cuts will turn things around.
“They’re not cutting jobs outright,’’ she said. ”They are just slowing hiring and putting people on temporary layoff, furlough. They want to get back to business. They see lots of opportunities to expand. They just need rates to be [lower].’’
The weak jobs report came two days after the Federal Reserve said it would hold off on cutting interest rates until it sees more evidence that inflation is continuing to move down and closer to its 2% target. Fed Chair Jerome Powell characterized the American job market as healthy, despite growing calls for the central bank to begin lowering its benchmark rate, which stands at a 23-year high, to preempt a major weakening of the U.S. economy and job market.
In another sign that the labor market is cooling, average hourly wages rose just 3.6% from July 2023, smallest year-over-year gain since May 2021 and a development likely to ease inflationary pressure in the economy.
Jobs gains were also concentrated in a few industries. Healthcare and social assistance firms added 64,000 jobs last month, accounting for 56% of hiring. Restaurants, hotels and bars added nearly 26,000 jobs.
Read the full story from Paul Wiseman and Christopher Rugaber at the Associated Press here.
