Friday’s surprisingly cool jobs report has reignited fears of both a U.S. recession and a resulting stock market crash. Just how bad was the July jobs data?

Well, by most accounts, not too bad at all. Indeed, the U.S. economy added 187,000 jobs last month, below projections for 200,000. While this is a notable slowdown from June’s 200,000 added jobs, it still represents an unemployment rate of just 3.5%. That’s actually an improvement from June’s 3.6% recorded rate, which was also the estimated jobless level for July.

Average hourly earnings also managed to surpass expectations. Wages increased 0.4% from June to July, for 4.4% annual wage growth, once again ahead of consensus predictions.

“The labor market seems to be humming along rather well at this point in the business cycle. A 3.5% unemployment rate, you can’t complain about that,” said Satyam Panday, U.S. chief economist at S&P Global Ratings. “It’s a nice glide path down.”

Jobs were largely bolstered by hiring growth in the education and health sector, which added 100,000 jobs last month. This was followed by construction, which contributed 19,000 jobs to the mix.

Interestingly, prime-age participation, that is, the percentage of people between 24 and 54 in the labor force, increased 0.4% to 83.4%, even higher than pre-pandemic levels.

Now, the obvious response to July’s jobs data may be one of skepticism. After all, how could economists be so troubled by such a benign jobs report?

While this attitude isn’t without merit, the story goes a bit deeper. Friday’s jobs report could be the first gentle breeze of an unrelentingly cold recession.

Stock Market Crash Fears Swirl as Equities Tumble

Economists have been ringing alarm bells since last year that the Federal Reserve’s historically aggressive rate-hiking campaign could only end in disaster. Specifically, many analysts believed the U.S. economy was bound to devolve into a recession, with many pointing to the second half of 2023 as the inevitable start of the downturn.

Through the course of 11 rate hikes, the central bank has lifted the Federal funds rate to between 5.25%-5.5%, the highest level in decades. The Fed has pulled no punches in its fight against inflation, which was exacerbated by pandemic-era stimulus. To some, a recession is the inevitable outcome to the most aggressive rate-hike cycle in more than 40 years.

Surprisingly, however, the past few months have been almost too good for the economy. Inflation has been rapidly falling, unemployment has been better than expected, consumer spending remains relatively elevated, and even corporate earnings have been strong. This has propped up hopeful sentimentalities that, maybe, just maybe, the U.S. will avoid a recession after all.

As such, Friday’s jobs report is less a recessionary gut punch and more a gentle reminder that we’re not quite out of the woods yet.

“The combination of tight labor supply and waning labor demand has slowed job growth to a more typical rate consistent with moderate economic expansion as seen in the years before the pandemic,” said Chris Low, chief economist at FHN Financial in New York.

It seems investors were equally on edge over the report. Indeed, the S&P 500 fell 0.8% on Friday, capping off a down week for equity markets overall.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.