The U.S. economy added more jobs than expected in August, but an unexpected rise in the unemployment rate to 3.8 percent and moderation in wage growth pointed to an easing in labor market conditions, which could bolster expectations that the Federal Reserve will not raise interest rates this month.
Nonfarm payrolls increased by 187,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for July was revised lower to show 157,000 jobs added instead of the previously reported 187,000.
The economy needs to create roughly 100,000 jobs per month to keep up with the increase in the working age population.
Economists polled by Reuters had forecast nonfarm payrolls increasing by 170,000 jobs last month. Striking Hollywood actors and the bankruptcy of a major trucking company had led economists to anticipate slower job growth in August.
A tendency for the initial payrolls count to be weaker in August before being subsequently revised higher in September and October, also factored into economists' expectations.
The Labor Department's Bureau of Labor Statistics, which compiles the employment report, had reported that there were almost 18,000 workers on strike during the period it gathered data for August's report, including 16,000 Screen Actors Guild-American Federation of Television and Radio Artists members.
Yellow Corp trucking filed for Chapter 11 bankruptcy in early August, leaving about 30,000 workers unemployed.
Though demand for labor is slowing, some services businesses like restaurants, bars and hotels remain desperate for workers. Job openings dropped to the lowest level in nearly 2-1/2 years in July, the government reported this week.
The unemployment rate increased to 3.8% as more people entered the labor force, from 3.5 percent in July. It remains below the U.S. central bank's latest median estimate of 4.1% by the fourth quarter of this year.
Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25 percent-5.50 percent range.
Before the report, financial markets were expecting the central bank to leave its benchmark overnight interest rate unchanged at its Sept. 19-20 policy meeting, according to the CME Group's FedWatch Tool.
With the labor market loosening, wage growth slowed somewhat. Average hourly earnings rose 0.2 percent after increasing 0.4 percent in July. In the 12 months through August, wages advanced 4.3 percent after increasing 4.4 percent in July.
(Reporting by Lucia Mutikani, editing by Nick Zieminski and Chizu Nomiyama)