US job growth misses expectations in July, unemployment rate rises to 4.3%

US job growth slowed more than expected in July and the unemployment rate rose to 4.3%, potentially fuelling fears of a deteriorating labour market that could potentially make the economy vulnerable to a recession.

Nonfarm payrolls added 114,000 jobs last month, following a downwardly revised increase of 179,000 in June, the Labor Department’s Bureau of Labor Statistics reported Friday in its closely watched employment report.

Economists polled by Reuters had forecast a rise of 175,000 jobs, after a 206,000 increase in June. Estimates ranged from 70,000 to 225,000.

Hurricane Beryl, which knocked out power in Texas and battered parts of Louisiana during the week of the jobs survey, likely contributed to the smaller-than-expected rise.

The labor market is slowing more from weak hiring than layoffs as Federal Reserve interest rate hikes in 2022 and 2023 dampen demand. Government data this week showed hiring fell in June to its lowest level in four years.

Average hourly earnings rose 0.2% last month, after 0.3% in June. In the 12 months through July, wages increased 3.6%. It was the smallest year-over-year rise since May 2021 and followed a 3.8% gain in June.

While wage growth remains above the 3%-3.5% range seen as consistent with the Fed’s 2% inflation target, the jobs report reinforces the case for a rate cut in September.

The rise in the unemployment rate from 4.1% in June marked the fourth consecutive monthly increase, which may raise fears that the economic expansion will continue.

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