(Reuters) – The U.S. economy added more jobs than expected in August but the jobless rate rose to 3.8% and wage growth slowed, suggesting a less tight labor market and fueling expectations of a status quo on Federal Reserve (Fed) rates this month.

The highly-watched monthly report from the Labor Department also showed that 736,000 people entered the labor market last month, bringing the participation rate (or activity rate) to its highest level in three and a half years.

Non-farm payrolls rose to 187,000 last month, while economists polled by Reuters forecast an average of 170,000 jobs.

The strike of Hollywood actors and screenwriters and the bankruptcy of the road haulier Yellow Corp had led economists to anticipate a slowdown in job growth in August.

The forecast was also influenced by the tendency for initial employment figures to be weaker in August, before being revised upwards in September and October.

The July figure has been revised to 157,000 instead of 187,000 announced in the first estimate.

If the labor market tends to slow down, the situation is still tense in several sectors such as health (+71,000 jobs in August) and hotels and restaurants (+40,000) which are struggling to find labor.

Conversely, 34,000 jobs were lost in transportation and storage following the bankruptcy of Yellow Corp earlier this month. The IT sector also destroyed jobs due in part to the impact of the strike in Hollywood.

The unemployment rate, for its part, rose to 3.8%, driven by the increase in the number of people entering the labor market, after 3.5% the previous month and a consensus that expected it to be stable.

As the labor market has eased, wage growth has slowed somewhat. The increase in the average hourly wage thus stands at 0.2% in August after 0.4% in July, which brings its increase over one year to 4.3%. Economists on average had expected increases of 0.3% over one month and 4.4% over one year respectively.

This slowdown in the labor market is explained by the drastic increase in interest rates by the Fed, which has raised them by 425 basis points since March 2022.

Markets now believe the central bank is done with raising the fed funds range, currently set at between 5.25% and 5.50%, and could start lowering it next March, according to the report. CME FedWatch barometer.

“This report is likely to put the Fed on hold in September, and if we have more positive inflation news in September and October, the Fed will likely be done, and we will have seen the end of rate hikes,” said Peter Cardillo, an economist at Spartan Capital Securities.

The New York Stock Exchange opened higher after the publication of the statistic while bond yields first widened their decline before starting to rise again.

(Lucia Mutikani, Diana Mandiá and Blandine Hénault for the , edited by Tangi Salaün)

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