America is still adding jobs, but no longer at a red-hot pace. That sent markets into a tailspin Friday, with the Dow Jones Industrial Average falling more than 900 points in morning trading. Job growth slowed sharply in July and the unemployment rate rose to its highest level since 2021, the Labor Department reported. The data adds to evidence that a labor market whose strength was already fading could actually be on its way to weakness.

Hiring slowed to 114,000 jobs last month, the government said, missing expectations. The unemployment rate rose to 4.3%—its highest level in nearly three years, when the economy was still clawing its way back from the pandemic. Stocks fell sharply after the data came out, reflecting investors’ renewed worries about an economic slowdown.

The jobs report is sure to give another spark to debates about whether the Federal Reserve is behind the curve in its handling of the economy. Fed policymakers on Wednesday kept rates where they are, but strongly implied that they would cut in September. Some investors have started to question whether the Fed has already waited too long to trim interest rates.

While the labor market was bound to cool down from its post-pandemic hiring spree, the question now is whether it will keep softening right into a recession. Friday’s jobs report wasn’t the only data released this week that pointed to a weakening economy. Thursday, the Institute for Supply Management reported that its measure of manufacturing employment deteriorated in July, helping spark a selloff in stocks. And after the close Thursday, Intel posted disappointing quarterly sales, and announced plans to lay off 15,000 people. Its shares were down nearly 30% on Friday.

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