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 / Updated  / Source: Reuters
By Reuters

U.S. employment growth slowed more than expected in August after two straight months of robust gains and wage gains moderated, which could effectively rule out an interest rate increase from the Federal Reserve this month.

Nonfarm payrolls rose by 151,000 jobs last month after an upwardly revised 275,000 increase in July, with hiring in manufacturing and construction sectors declining, the Labor Department said on Friday. The unemployment rate was unchanged at 4.9 percent as more people entered the labor market.

The report comes on the heels of news on Thursday that the manufacturing sector contracted in August, which had already cast doubts on an interest rate hike at the Fed's Sept. 20-21 policy meeting.

A woman clutches her resume at the Colorado Hospital Association health care career fair in Denver. REUTERS/Rick Wilking

The Fed lifted its benchmark overnight interest rate at the end of last year for the first time in nearly a decade, but has held it steady since amid concerns over persistently low inflation.

The step-down in employment would come after the economy created a total of 547,000 jobs in June and July. With the labor market near full employment and the economy's recovery from the 2007-09 recession showing signs of aging, a slowdown in job growth is normal.

Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with population growth. Over the last several years, the government's August payrolls estimates have been weak prior to upward revisions. In addition, the Institute for Supply Management said on Thursday factory employment declined in August for a second straight month.

Government payrolls are forecast rising 2,000 in August, extending the streak of job gains in the public sector to four months.