U.S. job growth slowed more than expected in July, while the unemployment rate increased to 4.3%, which could heighten fears that the labor market is deteriorating and potentially making the economy vulnerable to a recession.

Nonfarm payrolls increased by 114,000 jobs last month after rising by a downwardly revised 179,000 in June, the Labor Department's Bureau of Labor Statistics said in its closely watched employment report on Friday.

Economists polled by Reuters had forecast payrolls advancing by 175,000 jobs after a previously reported 206,000 gain in June. Estimates ranged from 70,000 to 225,000.

Hurricane Beryl, which knocked out power in Texas and slammed parts of Louisiana during the payrolls survey week, likely contributed to the below-expectations payrolls gain.

The labor market is slowing, driven by low hiring, rather than layoffs, as the Federal Reserve's interest rate hikes in 2022 and 2023 dampen demand. Government data this week showed hires dropped to a four-year low in June.

Average hourly earnings rose 0.2% last month after climbing 0.3% in June. In the 12 months through July, wages increased 3.6%. That was the smallest year-on-year gain since May 2021 and followed a 3.8% advance in June.

Though wage growth remains above the 3%-3.5% range seen as consistent with the Fed's 2% inflation target, it extended the run of inflation-friendly data. The employment report sealed the case for a September rate cut from the U.S. central bank.

The rise in the unemployment rate from 4.1% in June marked the fourth straight monthly increase. That could escalate fears over the durability of the economic expansion.