U.S. job growth slows, unemployment rises, fueling speculation about interest rate cuts


(MENAFN) In July, U.S. hiring slowed more than anticipated, with the unemployment rate climbing to its highest level since late 2021, according to government data released on Friday. The labor Department reported that the Economy added 114,000 jobs last month, a decrease from the 179,000 jobs created in June. This rise in unemployment, now at 4.3 percent, is the highest since October 2021 and underscores a cooling labor market amidst discussions about potential interest rate cuts.

President Joe Biden commented on the report, noting that while employment growth has slowed, inflation is significantly decreasing. This data brings the Federal Reserve closer to considering its first interest rate cut since the onset of the Covid-19 pandemic, as the economy decelerates and inflation nears its 2 percent target. However, experts caution that the Federal Reserve might need to implement more aggressive measures in the future to address economic challenges.

Analysts are concerned that the current economic data could signal the onset of a recession, though Ryan Sweet, chief economist at Oxford Economics, suggests that the current cycle is unique. He explained that the rise in unemployment is partly due to more people entering the labor market, which mitigates the risk of a negative feedback loop of increasing unemployment and lost income. Additionally, average hourly earnings increased less than expected in July, and wage growth on an annual basis slowed to its lowest rate since 2020. The stock markets reacted negatively on Friday, reflecting concerns about the economic outlook highlighted by the latest data. 

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