The US economy added only 114,000 jobs in July, significantly below the expected 175,000, while the unemployment rate rose to 4.3%, its highest level since October 2021.
This unexpected rise in unemployment and slower wage growth indicate a broader slowdown in the labor market, despite the Bureau of Labor Statistics noting no impact from Hurricane Beryl. Tara Sinclair, director of the GW Center for Economic Research, has been keeping a watchful eye on the unemployment rate.
“The labor market still looks good today. We’re still seeing job gains, the unemployment rate is still relatively low, and the share of the population 25-54 years old with a job is at a historical high,” says Sinclair. “However, we’re moving towards weakness. Until recently it looked like aggregate supply catching up to demand, and then perhaps exceeding it. Now, with the unemployment rate climbing to 4.3%, the signals are growing that this slow move towards weakness, which the Fed was actively looking for in order to bring inflation back to their target, might be gaining steam.”
The latest data also triggered the Sahm Rule, which has historically predicted recessions, adding to concerns about the economic outlook.
“This doesn’t look like the start of a recession, where demand drops away from supply. But it’s still weakness – it’s still demand less than supply. And weakness can beget further weakness as we saw today with the unemployment rate rising to 4.3%. The Fed has medicine to treat this weakness. They should have already given a small dose in their meeting this week, but I expect we’ll see them start the treatment in September,” says Sinclair.
Sinclair also serves as a professor of economics and international affairs at GW. Her research models, explains, and forecasts macroeconomic fluctuations and trends. She also evaluates forecasts, particularly with respect to their role in policy and decision-making. From 2022 to 2024 she served as the Deputy Assistant Secretary for Macroeconomics in the Office of Economic Policy at the Department of Treasury.
If you’re interested in connecting with Sinclair on the July jobs report, please contact GW Media Relations Specialist Tayah Frye at [email protected].
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