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Job Growth Slowed Significantly in July, while the Unemployment Rate Climbed to 4.3%

The July Labor Market Report showed significantly lower-than-expected job growth and the highest unemployment rate since 2021. Stocks plummeted as financial markets were panicked due to fears that the economy was weakening. While some economists state that the Sahm Rule has been triggered, indicating a recession has started (happens when the three-month moving average of the U.S. unemployment rate is 0.5 percentage points or more above its lowest during the previous 12 months), others say there’s no need to panic.

Job Growth Slowed in June but Remains Healthy

The labor market continues to be resilient. There are signs that the unprecedented growth over the last three years is gradually leveling off, but the market still shows strength. The U.S. economy added more jobs in June than expected. Still, the gains were narrow, primarily across a few sectors, including health care and social assistance, government and construction. Several sectors saw employment shrink, including manufacturing, retail trade and professional and business services. Yet, the market is strong, and rising unemployment with slowing wage growth should help bring inflation under control without tipping the economy into recession. The June jobs report could pressure the Fed to cut interest rates finally.

The U.S. economy added a far-better-than-expected 272,000 jobs in May, while the unemployment rate edged up to 4%, its highest level in more than two years. The labor market remains strong, with good news in terms of growth and participation. It continues to fuel the economy and support workers. At the same time, the report has some concerning, underlying numbers to watch, such as the unemployment rate, wage growth, part-time employment rate and the number of discouraged workers leaving the workforce.

April Jobs Market: Hiring Remains Firm with Signs of Slowing.

The increase in average hourly earnings is below estimates and is a promising sign for inflation. A softer than expected U.S. jobs report fueled hopes that the Federal Reserve could start cutting rates soon. Some economists predict a decrease as early as July or September.