(Updates with Reuters poll of bond dealers)
* Nonfarm payrolls increase 142,000 in August
* Unemployment rate falls to 6.1 percent from 6.2 percent
* Average hourly earnings up 6 cents, workweek steady
* Slowdown in job growth seen as an aberration
WASHINGTON, Sept 5 (Reuters) - U.S. employers hired the fewest number of workers in eight months in August and more Americans gave up the hunt for jobs, providing a cautious Federal Reserve with more reasons to wait longer before raising interest rates.
Nonfarm payrolls increased 142,000 last month after expanding by 212,000 in July, the Labor Department said on Friday. The jobless rate fell one-tenth of a percentage point to 6.1 percent, but that was partly because people dropped out of the labor force.
"Fed Chair Janet Yellen will be able to use the weakness to hold off hawks who would like to raise rates soon," said Diane Swonk, chief economist at Mesirow Financial in Chicago.
Data for June and July were revised to show 28,000 fewer jobs created than previously reported. In addition, manufacturing saw no job growth and retail payrolls declined for the first time since February, although a workforce disruption at a grocery store chain in New England weighed on the count.
Even though job growth slowed, the report still suggested that some of the slack in the labor market was being taken up.
U.S. stocks ended higher, notching a fifth straight week of gains. Prices for U.S. Treasury debt rose marginally, while the dollar was little changed against a basket of currencies even though economists had expected payrolls to rise by 225,000.
Interest rate futures, which had pointed to a likely rate hike in June of next year, rose to suggest less of a chance. Nevertheless, a Reuters poll of top bond firms found nine of 17 looked for an increase in borrowing costs in the second quarter; a poll a month ago showed only six of 19 expected such a move.
Swonk and other economists questioned whether the data was presenting an accurate picture given that it was at odds with other bullish labor market indicators.
They noted that first-time applications for unemployment benefits are hovering near pre-recession levels, that manufacturing and service sector surveys showed strong jobs growth in August, and that household perceptions of the labor market had brightened significantly.
In addition, difficulties adjusting the data for seasonal fluctuations have tended to understate job growth in August, and the end of a mass employee walkout at the grocery chain Market Basket could lead to a bounce in retail employment this month.
"The fundamentals in the economy remain solid, this is one month, and the economy should continue to expand at a decent pace in the second half of 2014," said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh.
NUMBER OF LONG-TERM UNEMPLOYED EASES
Yellen has expressed concern about sluggish wage growth, the still-elevated number of Americans working part-time even though they want full-time employment, and Americans still suffering from long spells of joblessness.
The U.S. central bank, which has held benchmark interest rates near zero since December 2008, has pointed to these metrics as evidence of "significant underutilization" of labor market resources that merits a stimulative monetary policy.
The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell to 62.8 percent in August from 62.9 percent in July. Before the United States fell into recession, it stood at 66.0 percent.
A paper published on Thursday by the Brookings Institution, a Washington-based think tank, suggested the decline was primarily due to an aging population and other structural factors, and concluded the labor force would continue to shrink.
Other metrics on Yellen's so-called dashboard, however, showed improvement.
A broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell to 12.0 percent, the lowest level since October 2009.
The gap between that figure and the official unemployment rate narrowed, a further sign of tightening labor market conditions. At the same time, the number of long-term unemployed Americans was the lowest since January 2009.
Average hourly earnings rose 6 cents in August, which marked an acceleration from July. Still, the year-on-year change held at 2.1 percent, which suggests little buildup of wage-related inflation pressure.
The Fed next meets on Sept. 16-17 to debate the course of monetary policy.
Jobs in the private sector increased 134,000 after rising by 213,000 in July. Government employment increased 8,000 as state governments hired teachers at the start of the new school year.
But manufacturing payrolls were the weakest in a year. The sector had added a hefty 28,000 jobs in July, which reflected a decision by automakers to keep assembly lines running in the summer. Auto payrolls fell 4,600, the first decline since March.
Construction employment advanced 20,000, the eighth straight monthly gain.
The 8,400 jobs lost among retailers reflected a drop of more than 17,000 in food and beverage store payrolls. (Reporting by Lucia Mutikani; Editing by Andrea Ricci, Tim Ahmann and Paul Simao)