As Vice President Kamala Harris prepares to accept the Democratic nomination later this month, a raft of bad economic news will likely temper some enthusiasm for her candidacy as one-half of the “Biden-Harris administration.” According to Friday reports, U.S. job growth slowed significantly in July, and the unemployment rate unexpectedly climbed to its highest level in nearly three years.
The Labor Department reported on Friday that employers added 114,000 jobs in July, falling well short of the 175,000 gain predicted by LSEG economists. The unemployment rate also unexpectedly rose to 4.3%, up from the anticipated 4.1%, marking its highest level 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.”
Fox Business added:
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.
Others are already seeing signs of a recession, one that will only be exacerbated by the same economic policies under the Biden-Harris administration.
Wow. 4.3% unemployment in July. (A big jump up from 3.5% in July 2023).
***The July jobs report has triggered the “Sahm Rule” indicating we could be in the early stages of a recession***
It’s possible this time is different. But this is a big warning sign that the job market… pic.twitter.com/SLsHXFV7YF
— Heather Long (@byHeatherLong) August 2, 2024
Over the past three months, the unemployment rate has averaged 4.13%, up 0.63 percentage points from the 3.5% rate recorded in July 2023. The Sahm Rule, which has accurately predicted every recession since 1970, indicates growing economic concerns. “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 job data also raises concerns about whether the Federal Reserve has delayed too long in cutting interest rates. After their two-day meeting concluded on Wednesday, policymakers decided to keep rates steady at a 23-year high but hinted at the possibility of easing policy as early as September. Investors are now increasingly betting on a 50-basis point cut in September, given the signs of weakening job growth.
By any measure, “the economy” is one of the top concerns among voters this year. In poll after poll, former President Donald Trump has been seen as being better for the economy than Biden. Recently, new polls have found him scoring higher with voters than Harris on the issue.
“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.”