Unemployment in US soars as fears grow Fed has left it too late to cut rates

Job growth in the US badly missed expectations in July and the unemployment rate jumped to the highest rate in almost three years.

Employers added 114,000 jobs last month, according to Labor Department data released Friday, far below the Dow Jones estimate of 185,000. 

The unemployment rate also edged higher to 4.3 percent - the highest level since October 2021. 

US stock futures fell Friday morning - rounding out a turbulent week - while Treasury yields plummeted, as the weak report stoked recession fears.

The cooling jobs market raises concerns that high interest rates are beginning to take a toll on the economy, after the Federal Reserve left benchmark borrowing costs unchanged yet again at a 23-year high at its latest meeting this week.

The US economy had proven strong in the face of the Fed's aggressive rate hiking campaign to tame inflation, which saw the central bank raise rates 11 times in 2022 and 2023.

But the cracks may now be beginning to show, igniting concerns that the economy could fall into a recession.

Job gains fell markedly from June, where 179,000 jobs were added, and July's unemployment rate 

This month, average hourly wages rose just 3.6 percent in the year from July 2023.

This was the smallest year-over-year gain since May 2021. 

Despite Fed Chair Jerome Powell indicating that there could be an interest rate cut coming next month, some investors think the central bank should have made the move on Wednesday.

The market is now 'wondering if the Fed is too late in transitioning monetary policy,' Quincy Krosby, chief global strategist at LPL Financial told CNBC. 

Bret Kenwell, US investment analyst at eToro, said this weak jobs report will mean the situation now shifts from 'if' the Fed will cut rates to 'by how much.'

'The labor market is the lifeblood to the US economy and the Fed needs to ensure that they don't risk weakening it too much solely in an effort to bring down inflation,' he said. 

'Almost getting inflation to the Fed's 2 percent target and keeping a strong economy is better than achieving the inflation target while sacrificing the economy to get there.'

Following the announcement of its latest interest rate decision, 

'The soft landing in the US labor market is in danger,' said Nick Bunker, economic research director for Indeed Hiring Lab.

'Yellow flags had started to pop up in the labor market data over the past few months, but now the flags are turning red. 

'The rise in the unemployment rate cannot be ignored as job gains have weakened and become less common. Something needs to change for the labor market to remain relatively healthy.'

This is a breaking news story. Updates to come.