(Reuters) - U.S. job growth slowed more than expected in August, with retail hiring declining for a seventh straight month, but strong wage gains should support consumer spending and keep the economy expanding moderately amid rising threats from trade tensions.

KEY POINTS:

* U.S. Aug nonfarm payrolls +130,000 (consensus +158,000) vs July +159,000 (prev +164,000), June +178,000 (prev +193,000)

* U.S. Aug labor force participation rate 63.2% vs July 63.0% (prev 63.0%)

* U.S. Aug jobless rate 3.7% (consensus 3.7%) vs July 3.7% (prev 3.7%)

* U.S. Aug average hrly earnings all private workers +0.4% (cons +0.3%) vs July +0.3% (prev +0.3%)

* Aug U-6 underemployment rate 7.2% vs July 7.0%

* Aug average workweek all private workers 34.4 hrs, as expected, vs july 34.3 hrs

* Aug factory jobs +3,000 (cons +8,000) vs July +4,000 (prev +16,000)

MARKET REACTION:

STOCKS: S&P e-mini futures ESv1 briefly pared losses then steadied and were last up 0.36%, pointing to a higher open

BONDS: Treasury yields slipped. 2- year US2YT=RR at 1.5362 and 10-year US10YT=RR at 1.5721%

FOREX: The dollar index .DXY turned slightly lower, last off about 0.1%

COMMENTS:

ART HOGAN, CHIEF MARKET STRATEGIST, NATIONAL SECURITIES, NEW YORK

“The net-net of this report is going to be good enough. I think the important components are labor participation and wages increase, which were in-line or better-than-expected. The market should be able to look at this and say this is a number that is good enough. It’s not alarming or shockingly high, and doesn’t probably change the way the Fed thinks about their decision. I don’t think there’s enough evidence for a higher basis point cut.”

BILL MERZ, HEAD OF FIXED INCOME RESEARCH, U.S. BANK WEALTH MANAGEMENT, MINNEAPOLIS

“It was a generally weak report. The U.S. labor market has been the last line of defense amid softening global economic data and we can’t read too much into any single report, but this is one more piece of evidence that the Fed is behind the curve.”

“Wage gains and hours worked were a silver lining, but that hasn’t led to higher inflation or inflation expectations yet, which is what the market really needs to see.”

“This report isn’t going to change what the Fed is going to do this month. And it’s not going to change what the Fed is going to do at their following meeting. The labor market continues to be the strongest point of data across the economic landscape, and that’s not what has been the catalyst for the Fed shifting to an easing bias. This report doesn’t have as strong of an impact on the forward path of monetary policy as the payrolls report has had in the past because the consumer is relatively healthy and the jobs market is relatively strong.”

NELA RICHARDSON, INVESTMENT STRATEGIST, EDWARD JONES, ST LOUIS

“It’s a mixed report at best ... it confirms what we knew that the economy is decelerating. We’re seeing a deceleration in jobs created and not just this month but the last two months.”

“The market is going to be in this weird state of bad news is good news. This low number points in the direction of a cut later in the month. Every piece of data now leads to the Fed.”

“It’s not all bad. Wage growth is holding steady. Wage growth means consumer spending will continue to be positive. The consumer’s been the engine of growth for this 10-year expansion and if the consumer looks healthy that’s a really good signal for the expansion to continue.”

“The average work week increased for the sector but over-time hours declined. That might show manufacturing is stabilizing but this is the sector to watch for the connection between trade uncertainty and the real economy.”

MICHAEL ARONE, CHIEF INVESTMENT STRATEGIST, STATE STREET GLOBAL ADVISORS, BOSTON

“The market is going to react pretty positive and the reason is that it continues to strengthen the case for the Fed to cut rates later this month and it has the potential to keep President Trump and the administration at bay regarding escalating trade tensions because of the softness in the report. It’s doubly good for investors.

“The risk here is the consumer has been the workhorse for the U.S. economy and if the labor market begins to slip that could be a risk to economic growth and that would prove a challenge for markets going forward.”

DOUG DUNCAN, CHIEF ECONOMIST, FANNIE MAE, WASHINGTON

“It reflects a slowing economy, but it’s not a major weakness. Hiring is slowing. With the unemployment rate holding constant, that’s good. Hourly wage continues to improve a bit. I expect to see some additional home construction jobs, but residential construction added only about 2,000 jobs which are the lowest since April. Unquestionably, all the trade and tariff discussions are weighing on hiring in that (transportation/warehousing/manufacturing) sector.”

JJ KINAHAN, CHIEF MARKET STRATEGIST, TD AMERITRADE, CHICAGO

“A little bit on the light side. I would say that maybe even a little lighter than you would think only because when you think about where these jobs are coming from – the census bureau hiring 25,000 - that is not repeatable. So that is a one-month little bump, so that gives you maybe a little bit of concern. The other thing that comes out from this is whether there’s going to be seasonal hiring for retail. I know we just passed Labor Day but they just continue to shed jobs like nobody’s business.

“You have temporary workers for the summer coming off. That and the census stuff makes this number a little funny, a little odd.”