U.S. employment growth slowed more than expected in July while the nonfarm payrolls count for the prior two months was revised down by a massive 258,000 jobs, pointing to a deterioration in labor market conditions that puts a September interest rate cut by the Federal Reserve back on the table.

Nonfarm payrolls rose by 73,000, less than almost all economists had forecast, while the unemployment rate ticked up to 4.2%, matching the median projection. Average hourly earnings were up 0.3%, leaving them 3.9% higher over 12 months – outpacing inflation.