US job growth comes up short in possible warning sign for Fed

The advance in payrolls was led by hiring in the health care and social assistance sectors. Construction and government also posted increases

US hiring fell short of forecasts in August after July’s payroll number was revised down, a development likely to fuel ongoing debate over how much the Federal Reserve should cut interest rates.

Nonfarm payrolls rose by 142,000 following downward revisions to the prior two months, Bureau of Labor Statistics data showed Friday. The unemployment rate edged down to 4.2%, the first decline in five months, reflecting a reversal in temporary layoffs. Average hourly earnings rose 0.4%.

Treasury yields slid on prospects that Fed officials could reduce interest rates by half a percentage point at their upcoming meeting to guard against sustained weakness in hiring. S&P 500 futures remained lower and the dollar extended losses.

Other reports suggest the job market is losing steam. While layoffs remain largely subdued, many companies are putting off expansion plans amid high borrowing costs and uncertainty ahead of the November presidential election. A Fed survey of regional businesses published Wednesday indicated employers have become more selective in hiring in recent weeks, with some cutting hours and leaving open positions unfilled.

The advance in payrolls was led by hiring in the health care and social assistance sectors. Construction and government also posted increases. The diffusion index, which measures the breadth of job growth, rose.

The participation rate — the share of the population that is working or looking for work — was unchanged in August at 62.7%. The rate for workers ages 25-54, also known as prime-age workers, edged lower for the first time since March.