Stock markets plunge as weak US jobs fuel fears

A global sell-off in stock markets gathered pace as weak US jobs growth stoked fears about a slowdown in the world’s largest economy.

Nasdaq, the tech-heavy US index, plunged by more than 3% on Friday, dragged lower by Intel and Amazon, after the companies reported disappointing results.

Official data showed employers added 114,000 jobs in July, far fewer than expected.

The figures suggested the long-running jobs boom in the US might be coming to an end, as speculation grows over when and by how much the Federal Reserve will cut interest rates.

Global stock markets were already on edge after US data showed weaker manufacturing activity on Thursday.

As well as the Nasdaq, the Dow Jones Industrial Average and S&P 500 also fell after markets in Asia and Europe sunk on Friday.

In Japan, the Nikkei 225 index tumbled to close nearly 6% lower.

Earlier this week, the Federal Reserve held interest rates again, but signalled it was likely to cut rates at its next meeting in September.

“Now the question isn’t will they [Federal Reserve] cut in September, but by how much,” said Jay Woods, chief global strategist at Freedom Capital Markets.

Seema Shah, chief global strategist at Principal Asset Management, said the latest jobs figures raised questions about whether the Fed had waited too long.

“Job gains have dropped below the 150,000 threshold that would be considered consistent with a solid economy,” she said.

“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.”

Friday’s report showed the unemployment rate rising to 4.3% – the highest rate since 2021 and up from 3.5% a year ago.

Wage gains have also slowed, with average hourly pay rising 3.6% over the last 12 months.

The stock market turmoil has emerged in the middle of a heated US presidential campaign, which has raised the stakes for the Fed and opened its moves up to intense political debate.

Republicans have suggested that lowering rates would amount to helping Democrats, with the party’s presidential candidate Donald Trump saying a pre-election rate cut is “something that they know they shouldn’t be doing”.

But Fed officials have consistently argued that politics do not bear on their decisions over rates.

In a statement following the jobs figures, President Joe Biden said the economy was still making progress.

The US economy expanded at an annual rate of 2.8% this spring, bouncing back after a slump at the start of the year.

Last month’s uptick in the unemployment rate also appeared driven by a rise in people looking for work, rather than a sudden surge in job losses, analysts said.

Nancy Vanden Houten, lead US economist at Oxford Economics, said she thought the report was “overstating emerging weakness”.

“We aren’t dismissing the entire upward creep in the unemployment rate, but the economy is not in recession,” she said.