America's employers slowed their hiring in August in the face of rising interest rates, high inflation and sluggish consumer spending, all of which have weakened the outlook for the economy.

The government reported Friday that the economy added 315,000 jobs last month, down from 526,000 in July and below the average gain of the previous three months. The unemployment rate rose to 3.7%, from a half-century low of 3.5% in July, as more Americans came off the sidelines to look for jobs and didn't find work immediately.

President Joe Biden celebrated the jobs report at an event on Friday, declaring that "the great American jobs machine continues to come back."

"In America workers are back to work, earning more, manufacturing more, building an economy from the bottom up and the middle out," Biden said. "With today's news, we have now created nearly 10 million new jobs since I took office," calling it "the fastest growth in all American history."

Biden also celebrated the increased labor force participation rate, specifically cheering that "working-age women are now, for the first time, back at work at rates not seen since before the pandemic."

The president hailed other recent promising economic news, including the fact that signs are showing inflation continuing to ease, increased wages, record-low unemployment, falling gas prices and announcements about major domestic investments from companies like Micron, Corning and Toyota.

"None of this is happening by accident," Biden said. "These investments in this recovery are a direct result of my economic plan. Some people gave up on American manufacturing, not me, not the [Commerce] Secretary, not the American people. 'Make it in America' is no longer just a slogan. It's reality in my administration."

The smaller August gain will likely be welcomedby the Federal Reserve. The Fed is rapidly raising interest rates to try to cool hiring and wage growth, which have been consistently strong. Businesses typically pass the cost of higher wages on to their customers through higher prices, thereby fueling inflation.

Fed officials hope that by raising borrowing costs across the economy, they can reduce inflation from a near-40-year high. Some economists fear, though, that the Fed is tightening credit so aggressively that it will eventually tip the economy into recession.

Job openings remain high and the pace of layoffs low, indicating that most businesses still want to hire and that the economy isn't likely in, or even close to, a recession. The broadest measure of the economy's output — gross domestic product — has shrunk for two straight quarters, meeting one informal definition of a recession.

Most economists, though, don't think a recession will have begun until the unemployment rate has risen steadily. In an interview with Spectrum News, Labor Secretary Marty Walsh also downplayed fears of a recession, pointing to the robust job growth under President Biden.

"The job report was a great one," he told Spectrum News. "The unemployment rate going up [to] 3.7%, I'm not concerned about that, because what we saw was more people enter the workforce. "The reason why that number went up is because we had more workers that were kind of not working or not looking for work now looking for work."

"What we really want to do over the next four or five months is see more people coming into the workforce," Walsh continued. "Even if that means the unemployment rate going up, it's okay, because we have 11 million job openings in the country. We want to get more people into the workforce to fill those jobs that are open."

Walsh went on to say that there are about 5 to 6 million Americans who can still enter the workforce, and added that immigration reform is a key to getting some of those 11 million positions filled. 

"That’s the single-biggest threat in my opinion to the economy, not having enough workers to fill the jobs," Walsh said in an interview with Spectrum News.

But experts say when it comes to recession fears, there’s more to consider than the unemployment rate. Dr. Victor Claar, an associate professor of economics at Florida Gulf Coast University, told Spectrum News that the unemployment rate almost always changes later than GDP.

"If you're looking only at the unemployment rate as your indicator of whether we're in a recession or not, you may look to see that number too late," Dr. Claar said. "What you need to be paying more attention to and what we see first is GDP."

Worries about a forthcoming recession have grown after Fed Chair Jerome Powell, in a high-profile speech last week, made clear that to curb inflation, the Fed was prepared to continue raising short-term interest rates for the foreseeable future and to keep them elevated. Powell warned that the Fed's inflation fight would likely cause pain for Americans in the form of a weaker economy and job losses.

The Fed chair also said the job market is "clearly out of balance," with demand for workers "substantially exceeding" the available supply. Friday's jobs figures and a report earlier this week that the number of job openings rose in July after three months of declines, suggested that the Fed's rate hikes so far haven't restored any such balance. There are roughly two advertised job openings for every unemployed worker.

The central bank has raised its short-term rate to a range of 2.25% to 2.5% this year, after the fastest series of increases since it began using its short-term rate to influence the economy in the early 1990s. It has projected that its key rate will reach a range of 3.25% to 3.5% by year's end. Those rate hikes have made borrowing and spending steadily more expensive for individuals and businesses. The housing market, in particular, has been weakened by higher loan rates.

The jobs figures are helping fill out the economic backdrop as this fall's congressional elections intensify. Republicans have pointed to high inflation to try to pummel Democrats in midterm campaigns. The Biden administration has pushed back and claimed credit for a robust pace of job growth.

Wages are rising at their fastest pace in decades as employers scramble to fill jobs at a time when fewer Americans are working or seeking work in the aftermath of the pandemic. Average hourly pay jumped 5.2% in July from a year earlier. Still, that was less than the 5.6% year-over-year in March, which was the largest annual increase in 15 years of records outside of the spring of 2020, when the pandemic struck.

Some skeptics warn that the Fed may be focusing excessively on the strength of the job market when other indicators indicate that the economy is noticeably weakening. Consumer spending, for example, and manufacturing have slowed. The central bank might raise rates too far as a result, to the point where it causes a deeper recession than might be needed to conquer inflation.

The economic picture is highly uncertain, with the healthy pace of hiring and low unemployment at odds with the government's estimate that the economy shrank in the first six months of this year, which is one informal definition of a recession.

Yet a related measure of the economy's growth, which focuses on incomes, shows that it is still expanding, if at a weak pace.

So far, the Fed's rate hikes have severely dented the housing market. With the average rate on a 30-year mortgage reaching 5.66% last week — double the level of a year ago — sales of existing homes have fallen for six straight months.

Consumers have moderated their spending in the face of much higher prices, though they spent more in July even after adjusting for inflation. But companies' investment in new equipment has slowed, indicating they have an increasingly cautious outlook on the economy.