4 things you should know about the confusing state of the US job market: NPR

The latest monthly report on the US labor market was eagerly awaited as it is intended to provide an important indicator of the health of the economy. Unfortunately, it provided a mixed picture that does not allow any clear conclusions to be drawn about the situation.

Overall, the data released on Friday indicate that hiring has declined compared to the beginning of the year, but not as much as feared a month ago.

It is a somewhat opaque combination that policymakers at the US Federal Reserve will have to sift through when they decide on the intensity of their interest rate cuts later this month.

Here are four takeaways from August’s employment numbers.

The labor market looks stronger in August than in the previous month

U.S. employers created 142,000 new jobs in August, a significant increase from the 89,000 jobs created the previous month.

Meanwhile, the unemployment rate fell to 4.2 percent, a relief after the rate unexpectedly rose to 4.3 percent in July, sparking fears about the state of the labor market – and the economy as a whole.

The increase in the unemployment rate in July was largely due to temporary layoffs; many of these people returned to work in August.

Hiring last month was concentrated in the hospitality sector (34,000 jobs), health care (31,000 jobs) and construction (34,000 jobs), while factories and retail cut jobs.

But the labor market looks weaker in August than at the beginning of this year

Although employers created more new jobs in August than in July, the overall pace of hiring slowed.

Last month's employment gains were about 30 percent below the average for the previous twelve months. In addition, employment gains for June and July were revised downward by a total of 86,000 jobs.

This is consistent with other reports, including one showing that there were fewer job openings with employers in July. And although the unemployment rate fell in August, it is still up half a percentage point since the beginning of the year.

Stock markets plunged as investors viewed the glass half empty, particularly after employers created fewer jobs in August than economists expected.

Wages are rising faster than prices

A weakening labor market situation compared to the beginning of the year may not be encouraging news for job seekers, but there is good news for those currently employed: average wages were 3.8 percent higher in August compared to the previous year.

Wage gains have outpaced inflation for over a year, and that trend is likely to have continued last month. (Inflation figures for August will be released next week.)

This means that the real purchasing power of employees is increasing and helping to offset the sharp price increases of recent years.

No clear signal for the Federal Reserve

Unfortunately, Friday's mixed labor market report does not provide policymakers with clear signals on how to proceed.

At its meeting on September 17 and 18, the Fed made it clear that it plans to cut interest rates. The central bank is also closely monitoring the labor market to assess how much interest rates should actually be cut.

But Friday's report does not offer much clarity. The drop in the unemployment rate suggests that the central bank can move slowly and cut interest rates by a modest 0.25 percentage points.

But the downward revision in employment growth in June and July could suggest more aggressive measures – for example, a half-percentage point cut in the key interest rate.

That's the challenge of being “data dependent,” as Fed policymakers like to describe themselves. Sometimes the data points in different directions.