Unemployment unexpectedly rose in July as pressure ramps up for the Fed to cut interest rates

• The US unemployment rate unexpectedly rose from 4.1% in June to 4.3% in July.
• The economy added 114,000 jobs, less than economists had predicted.
• The new jobs report on Friday comes after the Fed decided to hold rates steady.

The unemployment rate unexpectedly jumped in July, climbing to 4.3% from 4.1%.

US nonfarm payrolls also came in light, with the economy adding 114,000, missing the consensus expectation of 176,000. The Bureau of Labor Statistics also revised May and June job additions lower.

The weak report all but confirms the Federal Reserve will cut interest rates in September, an outcome that was already carrying a near-100% probability heading into the report.

Stock futures slid following the jobs report.

Wage growth slowed in July with a 3.6% year-over-year increase, following a 3.8% year-over-year increase in June.

Employment in the healthcare sector increased by 55,000 from June to July. Employment in the leisure and hospitality industry rose by 23,000, and employment rose by 25,000 in the construction. The information sector saw employment drop by 20,000.

Amid the rising unemployment rate, the overall labor force participation rate rose from 62.6% in June to 62.7% in July. The prime-age rate, or those aged 25-54, rose from 83.7% to 84.0%. The share of prime-working-age Americans with a job rose from 80.8% to 80.9%.

Friday's jobs report comes after this week's Federal Open Market Committee meeting, where the Federal Reserve held interest rates steady once again. Market traders and economists didn't expect a cut to happen in July anyway, despite data suggesting one could happen soon. "I think it's past time for them to cut interest rates," Mark Zandi, chief economist of Moody's Analytics, told Business Insider in July. "I think they have achieved their objective of full employment and inflation at target."

During a Wednesday press conference, Fed Chair Jerome Powell said of the outlook for rate cuts later this year that he "can imagine a scenario in which there would be everywhere from zero cuts to several cuts, depending on the way the economy evolves."

"The question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market," Powell said. "If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September."

Data from the Bureau of Labor Statistics published Tuesday showed the number of quits in June dropped by 121,000 from May's level. There were around 3.3 million quits in June and the quits rate was 2.1%. The layoffs and discharges rate was 0.9% in June; the last time it was this low was in April 2022. There were around 8.2 million job openings in June, similar to May's level.

"Overall, a broad set of indicators suggests that conditions in the labor market have returned to about where they stood on the eve of the pandemic — strong but not overheated," Powell said in his opening statement at the press conference on Wednesday.

This is a developing story. Please check back for updates.