Updated at 5:05 p.m. ET
U.S. employers added 130,000 jobs in August, according to a monthly snapshot from the Labor Department, signaling a slowdown in the pace of job growth.
Forecasters surveyed by the Reuters news service had predicted job gains of around 158,000.
The unemployment rate held steady at 3.7%.
The jobs total would have been lower without the addition of 25,000 temporary census jobs. Job gains for the two previous months were revised downward by a total of 20,000.
The report will be studied closely by forecasters trying to gauge the strength of the U.S. economy, which has been sending mixed signals in recent days.
Surveys this week from the Institute for Supply Management painted starkly different pictures of the manufacturing sector, which has been battered by the U.S. trade war with China, and the much larger services side of the economy, which continues to show strong growth.
Factories added just 3,000 jobs last month. Manufacturing activity shrank in August for the first time in three years.
"We've certainly seen a divide where the manufacturing sector has weakened much more notably," said senior economist Sarah House of Wells Fargo Securities. "But we have seen some softening in the broader service sector as well."
Employers added fewer than two-thirds as many service jobs in August as in the two previous months.
Still, manufacturing is more sensitive than the services sector to global forces such as the trade war. If the manufacturing slowdown is contained, the fallout could be limited.
"We haven't had a manufacturing-led recession for 50 years," said Jared Bernstein, an economist with the Center on Budget and Policy Priorities. "[It] doesn't mean we couldn't. But we're now talking about a sector that's 8% of employment and 11% of output. Those numbers used to be three times that."
Bernstein said that while the manufacturing sector is probably in a recession already, that need not bring down the larger economy.
"It's not pretty and it's not something I like to see and it's a totally self-inflicted wound, so it's really dumb," said Bernstein, who served as economic adviser to former Vice President Joe Biden. "But I don't know that it's recessionary at this point."
Federal Reserve Chairman Jerome Powell also downplayed recession fears Friday during an appearance in Switzerland.
"We see the most likely case for the U.S. and for the world, too, as continued moderate growth," Powell said. "We're going to continue to act as appropriate to sustain this expansion."
The Fed is widely expected to cut interest rates by a quarter percentage point when officials meet later this month. But Powell acknowledged differences among his colleagues about how much monetary medicine the slowing economy needs.
"There will always be questions about how much to do and how fast to move," Powell said. "Sometimes things are relatively clear. Other times, it's murky out there. There's a range of views. And I think this is one of those times."
The jobs report seemed likely to reinforce those Fed officials who are calling for a modest dose of additional stimulus.
Average hourly wages rose by 11 cents in August, to $28.11 — an average annual increase of 3.2%.
Wage gains and low unemployment helped to fuel strong consumer spending during the spring and summer.
"Household consumption right now is propping up the U.S. economy," said Joe Brusuelas, chief economist for the audit and consulting firm RSM. "We'll see if the uncertainty tax that's been placed on the economy by trade policy begins to adversely influence consumer attitudes."
A significant chunk of consumer spending is now going to nontraditional retailers. The retail sector continued to hemorrhage workers, shedding 11,000 jobs in August.
There was some positive news in the monthly jobs report. The labor force participation rate jumped two-tenths of a percentage point to 63.2%. And the average workweek rose by a tenth of an hour.
MARY LOUISE KELLY, HOST:
U.S. employers hired fewer workers last month. The Labor Department says employers added just 130,000 jobs in August, and that is fewer than forecasters were expecting. The number would have been even weaker had it not been for the hiring of 25,000 temporary census workers.
That jobs report is another sign of an economy that's been tapping the brakes. NPR's Scott Horsley is here.
SCOTT HORSLEY, BYLINE: Hi, Mary Louise.
KELLY: So how should we square this? Slowdown in job growth - on the other hand, the unemployment rate is still very low - right? - 3.7%.
HORSLEY: That's right. So the slowdown in job growth could be a normal sign of an economy that's at or near full employment. We often hear from employers who say they're having trouble finding workers to fill the job openings.
But it's also likely we're seeing some fallout from the ongoing trade war and the slowdown in global demand. The manufacturing sector in particular is vulnerable to that kind of fallout. And factories added only 3,000 jobs last month. The factory numbers for June and July were also revised down. Now that's consistent with some of the other economic indicators we got this week, which together paint a picture of a manufacturing sector that actually shrank last month for the first time in three years.
KELLY: So if overall the economy is tapping the brakes, as we put it, does that mean a recession is looming?
HORSLEY: Not necessarily. All indications are the U.S. economy is still growing. It's just growing more slowly than it was, say, a year ago. While the Trump administration talks a lot about manufacturing, it's important to keep in mind factories are a relatively small part of the overall economy. They represent about 8% of jobs, about 11% of GDP. Economist Jared Bernstein, who's with the left-leaning Center on Budget and Policy Priorities, says that's about a third of what factories represented a few decades ago. So a slowdown in manufacturing doesn't necessarily have to drag down the broader U.S. economy.
JARED BERNSTEIN: It's not pretty, and it's not something I like to see. And it's a totally self-inflicted wound, so it's really dumb. But I don't know that it's recessionary at this point.
HORSLEY: Now that said, we are also seeing some slowdown in the larger services side of the economy - things like health care and finance, radio reporters. The economy added less than two-thirds as many services jobs in August as in the two previous months. And what's more, we continue to see job losses in the retail sector. There were 11,000 fewer retail jobs in August. Even though consumers are still spending money, they're just not spending in a lot of traditional stores.
KELLY: Was there anything good in this jobs report, Scott?
HORSLEY: Yeah, there were some encouraging signs. The labor force participation rate ticked up. More than half a million new people came into the workforce. That's encouraging. It means people who've been on the sidelines are seeing opportunities in this tight job market.
We've also seen some acceleration in wage growth and a very slight increase in the average workweek. So you've got more people working more hours and making more money. That means consumers will have some spending power. And because consumer spending is such a big part of the economy, that should keep things afloat even if we're growing more slowly.
KELLY: All right, so we keep talking about growing more slowly, slowdown and so on. Does it follow that the Federal Reserve may roll into the rescue, cut interest rates in the coming days, months?
HORSLEY: You know, the Fed was already expected to cut rates by a quarter point at its next meeting in less than two weeks. And I don't think anything in this report's going to change that expectation. Fed Chairman Jerome Powell admitted to an audience in Switzerland, though, today we are in a kind of gray area. And there is some disagreement among his colleagues about just how much medicine the U.S. economy needs.
(SOUNDBITE OF ARCHIVED RECORDING)
JEROME POWELL: There'll always be questions about how much to do and how fast to move and things like that. But sometimes, things are relatively clear. Other times, it's murky out there. There is a range of views, and I think this is one of those times.
HORSLEY: Still, Powell stressed the central bank is committed to using its tools to prolong the now decade-old economic expansion.
KELLY: Thank you, Scott.
HORSLEY: You're welcome.
KELLY: NPR's Scott Horsley.
(SOUNDBITE OF GRAHAM NASH SONG, "BETTER DAYS") Transcript provided by NPR, Copyright NPR.