US job growth slows to 114K in July while unemployment unexpectedly jumps

U.S. job growth cooled sharply in July while the unemployment rate unexpectedly rose to the highest level in nearly three years.

The Labor Department on Friday reported that employers added 114,000 jobs in July, missing the 175,000 gain forecast by LSEG economists. The unemployment rate also unexpectedly inched higher to 4.3% against expectations that it would hold steady at 4.1%.

It marked the highest level for the jobless rate since October 2021.

“Temperatures might be hot around the country, but there’s no summer heatwave for the job market,” said Becky Frankiewicz, president of ManPowerGroup North America. “With across-the-board cooling, we have lost most of the gains we saw from the first quarter of the year.”

Friday’s report adds to mounting evidence that the economy is weakening in the face of ongoing inflation and high interest rates. Stock futures plunged as the report reignited fears of an impending recession, with Dow futures shedding more than 500 points.

That’s because the rise in unemployment triggered the so-called Sahm Rule, an indicator that is used to provide an early recession signal. The rule stipulates that a recession is likely when the three-month moving average of the jobless rate is at least a half-percentage point higher than the 12-month low.

Over the past three months, the unemployment rate has averaged 4.13%, which is 0.63 percentage points higher than the 3.5% rate recorded in July 2023. The Sahm Rule has successfully predicted every recession since 1970.

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