U.S. economy adds 114,000 jobs in July, unemployment rate spikes
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Construction workers in Austin, Texas last month. Photo: Jordan Vonderhaar/Bloomberg via Getty Images
The U.S. economy added 114,000 jobs in July, while the unemployment rate rose to 4.3%, the Labor Department said on Friday.
Why it matters: The jobless rate kept moving higher in July, adding to fears that the labor market—the bedrock of the economy—is slowing down and the economy is at risk of a recession.
- The unemployment rate, which was 4.1% in June, is the highest since 2021.
Between the lines: Hiring slowed in July from the prior month's downwardly revised 179,000 job gains.
- The Labor Department said the economy added 29,000 fewer jobs than initially estimated in May and June.
- Economists expected the economy to add 185,000 jobs in July.
Zoom in: The biggest job gains in July were in health care and construction, while the information sector—which includes the technology industry—lost jobs.
- Average hourly earnings, a gauge of wage growth, rose 0.2% or 3.6% over the past 12 months.
The big picture: Federal Reserve chair Jerome Powell this week hinted that the central bank could cut interest rates next month—a move that would reduce constraint on the economy.
- Fed officials said that inflation was no longer their only concern. They are worried about the labor market slowing down too much in a way that could slam the broader economy.
- The job market has moved "from overheated conditions to more normal conditions," Powell told reporters on Wednesday.
- "If we start to see something that looks to be more than that, then we're well positioned to respond," Powell added.
The intrigue: The increase in the unemployment rate means the economy has triggered the "Sahm Rule," which has a strong track record of signaling in real-time when the economy is in recession.
- The rule says the economy is likely in a recession when there is a 0.5 percentage point increase in the three-month average unemployment rate over the prior 12 months.
- Claudia Sahm, the economist who created the rule, told Axios last month that her indicator might trigger falsely — given the quirks associated with the rebound from the pandemic-era economy.
Go deeper: The economic slowdown that wasn't
