US employers add moderate 128,000 workers in Aug

WASHINGTON, Sept 1 (Reuters) U.S. employers added a moderate 128,000 workers to their payrolls in August, in line with expectations, according to a government report on Friday that suggested the Federal Reserve may not need to raise interest rates further.

The closely watched report on nonfarm payrolls from the Labor Department also showed the unemployment rate dipped to 4.7 percent, after a surprise jump to 4.8 percent in July.

But many other aspects of the data were soft.

Average hourly earnings rose a scant 0.1 percent, or 2 cents, last month. Over the past 12 months, earnings have risen 3.9 percent - matching the revised July gain as the highest since June 2001.

Many economists, however, had braced for a sharper 0.3 percent monthly rise that could have fostered concerns over potential interest-rate hikes.

In addition, the length of the average work week dipped by 0.1 hours to 33.8 hours, pulling down an index of overall hours worked in a potential sign of soft growth.

Wall Street economists had expected nonfarm payrolls to expand by 120,000 workers last month, not far from the department's actual count, and had expected the jobless rate to slip slightly.

The department revised the payroll employment count for the prior two months marginally higher - adding a net 18,000 jobs - but the data still show that employment gains have eased since the start of the year.

After raising benchmark borrowing costs in 17 small steps dating to June 2004, the Fed stepped to the sidelines at its last meeting on Aug. 8 and held interest rates steady.

The U.S. central bank, however, had said it was still focused on inflation risks, and signs of an easier pace of economic growth could buttress expectations in financial markets that the next move on rates is down.

REUTERS DKS GC1819