In August, US companies created 315,000 fewer jobs than in July as concerns about a downturn in the labor market grew.
The US Labor Department reported that the unemployment rate increased from 3.5% to 3.7%.
The report follows previous data showing that the largest economy in the world is still contracting.
To control rising prices, the Federal Reserve, the US central bank, is hiking interest rates.
The non-farm payrolls statistic for August is significantly lower than the figure for July when US firms added more than 500,000 jobs.
The amount is a little larger than economists had anticipated, though.
The jobs situation is being closely monitored by the Federal Reserve, and investors have been checking the most recent data for any indications that the economy is about to enter a recession.
Jerome Powell, the chairman of the Fed, issued a warning last week, saying that higher interest rates are necessary to prevent inflation from becoming a persistent feature of the US economy.
Inflation, which measures how quickly prices are rising, has reached a 40-year high in the US.
Although higher borrowing costs are intended to cut back on spending and control inflation, they may also cause the economy to sputter. The Fed is expecting that the labor market will continue to be robust enough to allow rate increases without causing a recession.
The US economy has contracted for two consecutive quarters. That milestone would be seen as an economic recession in many nations.
But in the US, where that decision is made using additional data, that is not the case.
The increase in the US unemployment rate, according to Janet Mui, head of market analysis at asset manager Brewin Dolphin, was “an unsettling read.”
“However, it remains at a near historic low and was driven by an increase in labor force participation,” she continued. “This is good news for policymakers because it means that more people were in the labor force working or looking for work.
While the number of jobs created exceeded economists’ forecasts, Ms. Mui noted that wage growth came in a little lower than expected.
In the report released on Friday, the average hourly salary increased by 5.2% from August 2021.
“This is a solid body of information that supports a stable and competitive job market. The report released today is only marginally supportive of the Fed’s hawkish stance and the story of peak US inflation “Ms. Mui went on.