The unexpected rise in unemployment in the United States has left economists divided in their assessments: Is the U.S. on the brink of a recession, or is it not? The latest statistics show that the unemployment rate jumped to 4.3% in July, marking the highest level in nearly three years. This is an increase from 4.1% in June and a significant rise from the five-decade low of 3.4% in April of last year.

This recent development raises the question of whether it is too late to react. Gary Clyde Hufbauer, a senior fellow at the Peterson Institute for International Economics, stated that the rising unemployment “points to a recession in 2025.” He expects that the U.S. central bank, the Federal Reserve, will begin cutting interest rates in September and maintain further reductions in subsequent meetings, which will likely lead to a mild recession.

The stock market reacted quickly to these developments, with the Dow Jones Industrial Average falling by over 700 points—nearly 2%—in trading on Friday. The broader S&P 500 index also decreased by 2%. Wall Street banks are now calling for larger interest rate cuts than previously anticipated.

Economists at Goldman Sachs and Citigroup have adjusted their forecasts, predicting a half-percentage-point cut in both September and November, along with a quarter-point reduction in December. This comes after a week of weaker economic data, including a decline in the manufacturing sector and negative employment assessments, indicating an economic downturn.

However, not all economists share this pessimism. Nancy Vanden Houten, chief economist at Oxford Economics, does not see signs of a recession. “The jobs report was certainly weaker than most economists had expected, but there are factors beneath the surface that need to be considered,” she said.

For instance, more people are entering the job market; about 420,000 individuals joined the workforce last month. These new participants include immigrants, which, according to Vanden Houten, is a positive indication. Additionally, there was a significant increase in the number of individuals reporting temporary layoffs, which was also influenced by political conditions such as bad weather caused by Hurricane Beryl in Texas.

Matt Colyar from Moody’s Analytics pointed out that the number of people reporting work stoppages due to bad weather was higher than in any non-winter month since September 2017. He believes that the Federal Reserve’s efforts to slow down the economy and curb wage increases are proceeding as intended, which does not necessarily indicate a recession.

The previous recession prior to the pandemic had different causes, including very high household debts, which is not currently the case, Vanden Houten added. The discussion surrounding the “Sahm Rule”—which measures how quickly unemployment is rising—has also gained relevance. While this rule is approaching activation, Sahm herself has stated that a recession is not “imminent.”

Both economists, Vanden Houten and Colyar, maintain their earlier predictions regarding interest rate cuts. “It takes more than a disappointing jobs report for me to declare that the recession they have been waiting for is finally here,” Colyar stated.

Looking ahead, this month’s jobs report will provide a clearer picture of the labor market and the U.S. economy. Until then, economists like Colyar will monitor weekly unemployment claims to get a sense of the current situation.

Outside of economic analysis, the data will also impact the upcoming presidential elections. Former President Donald Trump’s campaign stated that the jobs report is “further evidence that the Biden-Harris economy is failing Americans.” A weakening economy could be used against the incumbent administration, and although President Joe Biden is not running, Vice President Kamala Harris may be negatively affected by the situation.