close video Construction boom leads to more jobs in the industry
Construction is booming in states like Arizona, California, Florida and Texas.
U.S. job growth cooled sharply in July while the unemployment rate unexpectedly rose to the highest level in nearly three years.
The Labor Department reported Friday that employers added 114,000 jobs in July, missing the 175,000 gain forecast by LSEG economists. The unemployment rate also unexpectedly inched higher to 4.3% against expectations that it would hold steady at 4.1%.
It marked the highest level for the jobless rate since October 2021.
"Temperatures might be hot around the country, but there’s no summer heatwave for the job market," said Becky Frankiewicz, president of ManPowerGroup North America. "With across-the-board cooling, we have lost most of the gains we saw from the first quarter of the year."
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Friday's report adds to mounting evidence that the economy is weakening in the face of ongoing inflation and high interest rates. Stock futures plunged as the report reignited fears of an impending recession, with Dow futures shedding more than 500 points.
That's because the rise in unemployment triggered the so-called Sahm Rule, an indicator that is used to provide an early recession signal. The rule stipulates that a recession is likely when the three-month moving average of the jobless rate is at least a half-percentage point higher than the 12-month low. Over the past three months, the unemployment rate has averaged 4.13%, which compares to a jobless rate of 3.5% in July 2023.
The Sahm Rule has successfully predicted every recession since 1970.Ticker Security Last Change Change % I:DJI DOW JONES AVERAGES 39870 -477.97 -1.18% I:COMP NASDAQ COMPOSITE INDEX 16748.960662 -445.18 -2.59% SP500 S&P 500 5357.07 -89.61 -1.65%
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"The latest snapshot of the labor market is consistent with a slowdown, not necessarily a recession," said JEffrey Roach, chief economist at LPL Financial. "However, early warning signs suggest further weakness."
The weaker-than-expected data also raises questions about whether the Federal Reserve has waited too long to cut interest rates, which have sat at the highest level since 2001 for more than a year.
A construction worker in Raleigh, North Carolina on Wednesday, July 17, 2024. (Photographer: Allison Joyce/Bloomberg via Getty Images / Getty Images)
The report also showed modest revisions. Job gains for June were revised down by a total of 27,000 jobs to 179,000, the government said, while May's gain also came in slightly lower at 216,000 jobs.
"The labor market’s slowdown is now materializing with more clarity," said Seema Shah, chief global strategist at Principal Asset Management. "Job gains have dropped below the 150,000 threshold that would be considered consistent with a solid economy…A September rate cut is in the bag and the Fed will be hoping that they haven’t, once again, been too slow to act."
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This is a developing story. Please check back for updates.
