WASHINGTON — The US economy suffered an unexpected setback in July as hiring fell sharply and the unemployment rate rose for the fourth straight month, with raised interest rates taking a toll on businesses and households.

Employers added just 114,000 jobs last month — 35 percent fewer than expected — and unemployment, now at 4.3 percent, is the highest since October 2021, the Labor Department reported on Friday.

"Things are deteriorating quickly," said Julia Pollak, chief economist at job posting platform ZipRecruiter.

The sharp downturn in US hiring shook global financial markets. The Dow Jones Industrial Average dropped 610 points, or 1.5 percent. The S&P 500 tumbled 1.8 percent.

The unemployment rate's jump to 4.3 percent last month crossed a trip wire that historically has signaled recession, though economists say the gauge probably is not reliable in the post-pandemic economy.

Hiring may have been disrupted by Hurricane Beryl, which slammed the Texas economy last month. And Pollak said employers have cut work hours and made temporary layoffs, suggesting they are optimistic a rate cut may turn things around.

"They are just slowing hiring and putting people on temporary layoff, furlough," Pollak said. "They want to get back to business. They see lots of opportunities to expand. They just need rates to be (lower)."

At the Barrel Room, a San Francisco wine bar and restaurant, founder Sarah Trubnick is puzzled by what is happening with the economy. After an "insanely busy" first three months of the year, she had high hopes for the rest of the year. But business plummeted over the summer, and she does not know why.

She had to lay off four workers and now has 10 at the business she founded in 2011.

"We had been in business for many years," she said. "So we were very familiar with the patterns, and we knew when to bring on more people, when to expect difficult times. And we knew we had to have a financial cushion at times. We had it all down to a science. And post-COVID I can't figure out the pattern."

The Labor Department reported on Thursday that 1.88 million people were collecting unemployment benefits in the week of July 20 — most since November 2021 and a sign that those without a job are likely struggling to find a new one.

Julian Cannon, 34, of New York lost his job as a reporter at an online publication back in December. He has applied for hundreds of jobs with no luck. One company interviewed him eight times for several positions, then ended up hiring a candidate who already worked there. "I'm still looking, and I'm at a breaking point," he said.