In August, the U.S. economy added fewer jobs than expected, suggesting a slowdown in the labor market and potentially paving the way for the Federal Reserve to lower interest rates later this month—a development that could also impact Vice President Kamala Harris’ campaign.

Nonfarm payrolls rose by 142,000, a significant increase from July’s 89,000 but falling short of the Dow Jones forecast of 161,000, according to the Labor Department’s Bureau of Labor Statistics. The unemployment rate edged down to 4.2%, aligning with predictions, but underlying factors paint a more complex picture.

The labor force grew by 120,000 in August, which contributed to a slight decrease in the unemployment rate, though the labor force participation rate held steady at 62.7%. An alternative measure, encompassing discouraged workers and those in part-time positions, climbed to 7.9%—the highest level since October 2021.

The household survey, which tends to be more volatile, reported an employment increase of 168,000, but most of this growth was in part-time jobs, which surged by 527,000, while full-time employment dropped by 438,000.

Despite August’s job numbers being close to expectations, the previous two months saw notable downward revisions. The Bureau of Labor Statistics revised July’s job figures down by 25,000, and June’s numbers were cut to 118,000, a reduction of 61,000.

These adjustments followed the Biden-Harris administration’s admission that actual job growth over the past couple of years was nearly 900,000 fewer than initially reported.

“I don’t like this a whole lot. It’s not disaster, but it’s below expectations on the headline, and what really bothers me is the revisions,” Dan North, senior economist for North America at Allianz Trade, told CNBC. “This is certainly going the wrong way.”

The outlet added:

The report comes with markets on edge over the next step for the Fed, which has been on hold with rates since July 2023 after having enacted a series of sharp increases to bring down inflation.

Heading into the release, markets had been pricing in a 100% probability that the Fed will start cutting rates when it meets Sept. 17-18. The only question was how much.

Following the payrolls release, futures market pricing briefly tilted towards a half percentage point cut but then switched back to a quarter point, according to the CME Group’s FedWatch gauge.

“For the Fed, the decision comes down to deciding which is the bigger risk: reigniting inflation pressures if they cut by 50 [basis points] or threatening recession if they only cut by 25 [basis points],” Seema Shah, chief global strategist at Principal Asset Management, told CNBC. “On balance, with inflation pressures subdued, there is no reason for the Fed not to err on the side of caution and frontload rate cuts.”