The US labor market cooled significantly last month as unemployment unexpectedly rose, sparking fears of a slowdown across the world’s largest economy.
American employers added 114,000 jobs in July – significantly short of the 180,000 additions expected by economists, and a significant decrease from the 179,000 added in June.
The headline unemployment increased to 4.3%, its highest level since October 2021, up from 4.1% the previous month.
Wall Street fell sharply during pre-market trading, with the S&P 500 down 1.8% and the technology-focused Nasdaq down 2.6% following the official release.
On the campaign trail, the strength of the US economy has become a key issue. With many still feeling the pinch from years of high inflation, a majority of Americans wrongly believe the US is in recession, according to a Harris poll for the Guardian earlier this year.
Donald Trump, seeking to regain the White House, has tried to tap into the malaise by claiming that Joe Biden has damaged the US economy. But President Biden, who this month withdrew from the election and endorsed vice-president Kamala Harris, has insisted the US emerged from the Covid pandemic with the “strongest economy in the world” on his watch.
As presidential candidates trade barbs over the economy, policymakers at the Federal Reserve are watching closely. The US central bank, which held interest rates this week, has signaled it could start to cut them later this year.
The Fed scrambled to cool the world’s largest economy two years ago, raising rates to a two-decade high as inflation surged to its highest level in a generation.
Officials are now monitoring how fast price growth fades, and the broader strength of the US economy, as they look to reduce rates. “We’re getting closer to the point,” the Fed chair Jerome Powell said on Wednesday, “but we’re not quite at that point yet”.
Policymakers hope to guide the US to a so-called “soft landing,” whereby inflation is normalized, and recession is avoided.
Economists look to the monthly non-farm payrolls report, released by the US Bureau of Labor Statistics, for a regular readout on the state of the economy.
Treasurer Jim Chalmers appeared on Channel 9's Today Show this morning with host Karl Stefanovic.He was asked for his reaction to the US rate cut and how things
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