Hiring in the US slowed sharply last month and the unemployment rate rose, stoking fears about the state of the world’s largest economy.
Employers added 114,000 jobs in July, official figures showed, fewer than expected and far lower than in June.
Global stock markets are already on edge after earlier US data showed weaker manufacturing activity and major companies such as Intel and Amazon published a string of disappointing financials.
The employment figures suggest the long-running jobs boom in the US might be coming to an end, as the highest borrowing costs in two decades weigh on the economy.
The three major share indexes in the US, which were hitting new records just a few weeks ago, have been on a downward slide in recent days.
It has sparked fears which have also spread to international markets.
In Asia and Europe, most major indexes were down on Friday, with Japan’s Nikkei 225 index tumbling, to close nearly 6% lower.
Neil Birrell, chief investment officer at Premier Miton Investors, said the US jobs data, which showed the unemployment rate rising to 4.3% from 4.1% in June, “couldn’t have been released at a more sensitive time”.
“Markets are wobbling, concerns over Fed policy abound and corporate earnings are in the spotlight,” he said. “The weak data will cause more angst, and concerns over the health of the economy will increase.”
The Federal Reserve, unlike other central banks including the Bank of England, has held off cutting interest rates in recent months, pointing to relatively strong growth, as a healthy job market helps prop up consumer spending.
But the head of the bank, Jerome Powell, said this week that the labour market had cooled significantly over the last 12 months.
Friday’s report showed the unemployment rate rising to 4.3%, compared with 3.5% a year ago.
Mr Powell signalled it was likely to cut rates at its next meeting in September, warning he did not want to see further weakening in the labour market.
But Seema Shah, chief global strategist at Principal Asset Management, said the latest 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.”
