According to data released Friday by the Bureau of Labor Statistics, unemployment rose to 4.3 percent, its highest rate since October 2021 in July, as the economy added a surprisingly low 114,000 jobs. The stock market fell in response, with the tech-focused Nasdaq falling 10 percent from a record high.

“The July jobs report is being viewed as a recession warning, and the markets are responding accordingly,” commented Bill Adams, the chief economist of Comerica Bank.

The rise in unemployment has triggered the Sahm Rule, which has correctly predicted every recession since 1970, and which posits that an economy is in the early stages of a recession when the three-month moving average in the unemployment rate is at least half a percent higher than the 12-month low. Currently the three-month moving average for unemployment is 4.13 percent, 0.63 percent higher than its 12-month low of 3.5 percent in July 2023. 

“Once the unemployment rate gets moving upward, it’s very likely to continue rising. Rising unemployment is part of a vicious process of economic contraction,” noted Preston Caldwell, the chief U.S. economist at Morningstar. 

Nevertheless., not all believe that a recession is inevitable. The economist Mark Zandi said that he believes that a recession is unlikely. “I do feel like this economy will be able to navigate through this, but it’s going to be close,” Zandi added, continuing, “They’ve got to get moving here.”

Senator Elizabeth Warren (D-MA) responded to the jobs report by taking to X and ascribing blame to the decision of the Federal Reserve not to cut interest rates. “Fed Chair Powell made a serious mistake not cutting interest rates. He’s been warned over and over again that waiting too long risks driving the economy into a ditch,” Warren claimed.