Investing.com -- The US economy added fewer jobs than anticipated in August, but rose from a sharply revised July figure, according to Labor Department data that could factor into the Federal Reserve's next policy decisions.
Nonfarm payrolls came in at 142,000 last month, up from a heavily downwardly-revised mark of 89,000 in July. Economists had called for a reading of 164,000, an uptick from the initial July mark of 114,000.
Friday's release also showed the US unemployment rate at 4.2%, compared to July's figure of 4.3%. The level was in line with estimates.
On a monthly basis, average hourly earnings growth also ticked up to 0.4% after contracting by 0.1% in July.
"The Aug[ust] jobs report isn’t as bad as feared, but it’s still pretty soft," analysts at Vital Knowledge said in a note to clients.
Separate data leading up to the Labor Department's report have shown that US private employers hired the fewest number of workers since 2021 in August, while job openings dipped to a 3-1/2-year low in July. But worries over a deterioration in the American labor market were somewhat soothed by other figures showing a decline in jobless claims and expansion in services sector activity.
Crucially, the nonfarm payrolls data will likely play into how Fed Chair Jerome Powell approaches a much-anticipated shift away from a focus on taming inflation to preparations aimed at guarding against job losses. Powell said in August that the "time has come" to adjust monetary policy due to potential "downside risks" facing the US jobs market.
This week, other Fed officials have voiced similar sentiments. In an interview with Reuters, San Francisco Fed President Mary Daly argued that if the Fed's monetary policy became "overly tight" it could lead to "additional slowing" in the US employment picture.
"[T]o my mind, that would be unwelcome," she said, according to Reuters.
According to the CME Group's (NASDAQ:CME) closely-monitored FedWatch Tool, analysts are all but convinced the Fed will roll out a reduction in borrowing costs at the central bank's upcoming two-day gathering from Sept. 17-18. Interest rates currently stand at a 23-year high of 5.25% to 5.5%.
Following the release, bets that the Fed will introduce a deeper 50 basis-point rate cut -- rather than a shallower 25 basis-point reduction -- briefly increased before later retreating.
"We think the Fed should cut 50 [basis points] out the gates with this data, but the [rate-setting Federal Open Market] Committee is inertial and Powell may not have enough here to deliver 50 [basis points], and may have to settle for a dovish 25 [basis points]," analysts at Evercore ISI said in a note.
Meanwhile, the rate-sensitive 2-year Treasury yield sold off, while its 10-year counterpart retraced earlier losses. That contributed to the steepening of the yield curve, which is once again positive. Yields typically move inversely to prices.
Stock markets on Wall Street opened in mixed fashion, while the US dollar index -- a measure of the greenback against a basket of its currency peers -- edged higher.