US labor market stays afloat as unemployment rate falls to 4.2% | U.S. & World [Video]

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. employment increased less than expected in August, but a drop in the jobless rate to 4.2% suggested the labor market was not falling off the cliff to warrant a half-point interest rate cut from the Federal Reserve this month.

The closely watched employment report from the Labor Department on Friday also showed solid wage growth last month, which should help to support consumer spending and keep the economy out of recession for now. Nonetheless, labor market momentum has slowed, with 86,000 fewer jobs added in June and July than previously reported.

The report led to a chorus of Fed officials declaring that the U.S. central bank was ready to start cutting rates at its policy meeting in about two weeks. Higher borrowing costs are curbing overall demand in the economy.

“The labor market is cooling at a measured pace,” said Jeffrey Roach, chief economist at LPL …