The US jobs market cooled much more than expected in July with the unemployment rate reaching its highest since late 2021, government data showed Friday, paving the way towards post-pandemic interest rate cuts.
The world's biggest economy added 114,000 jobs last month, down from June's revised 179,000 figure, said the Department of Labor.
The jobless rate rose to 4.3 percent, the highest level since October 2021, according to government data.
The report brings the Federal Reserve a step closer to its first rate cut after the Covid-19 pandemic -- with the economy cooling and inflation moving towards officials' two percent target.
While analysts have raised concern of the US economy triggering an early recession indicator, Oxford Economics chief US economist Ryan Sweet believes that "this cycle is unique."
In recent times, unemployment has edged up as more people entered the labor force. This marks less of a risk that a vicious cycle of rising jobless rates leads to income loss -- and further employment losses, he previously told AFP.
In July, average hourly earnings rose less than analysts expected by 0.2 percent to $35.07, the Labor Department report said.
On a year-on-year basis, wage growth slowed to a rate last seen in 2020.
"Employment continued to trend up in health care, in construction, and in transportation and warehousing, while information lost jobs," said the Labor Department.
It added that government employment, which slowed in recent months, was little changed in July.
"There are signs that momentum is waning," said KPMG chief economist Diane Swonk about public sector hiring in a recent note.
"Revenues at the state and local levels have fallen short of budgets this fiscal year, while COVID-era subsidies have lapsed," she added.
Apart from a downward revision to June's hiring figures, job growth in May was also slightly lower than initially estimated, Labor Department data showed.
The latest report will likely bolster the Fed's confidence to begin cutting rates in September.
Although the central bank has been focused on reining in runaway inflation in recent years, Fed Chair Jerome Powell previously said that policymakers have been monitoring the labor market too.
An unexpected weakening in the jobs market could be a reason for a Fed policy response, he noted.
In a separate statement on Friday, top Democrat on the House Budget Committee Brendan Boyle said that while the US workforce is "strong," it is also time for the Fed to begin lowering rates.
