WASHINGTON — Slowly and steadily, an overheated American job market is returning to room temperature.

The Labor Department is expected to report Friday that employers — companies, nonprofits and government agencies combined — added 170,000 jobs last month, according to a survey of forecasters by the data firm FactSet. That would be down from the 187,000 jobs that were added in July and would be the lowest monthly gain since December 2020.

“We are beginning to see this slow glide into a cooler labor market,’’ said the chief commercial officer at the employment firm ManpowerGroup, Becky Frankiewicz. “Make no mistake: Demand is cooling off. … But it’s not a freefall.’’

The latest sign that the pace of hiring is losing some momentum — without going into a nosedive — would be welcomed by the Federal Reserve, which has been trying to tame inflation with a series of 11 interest rate hikes. 

The Fed is hoping to achieve a rare “soft landing,” in which it would manage to slow hiring and growth enough to cool price increases without tipping the world’s largest economy into a recession. Economists have long been skeptical that the Fed’s policymakers would succeed.

But optimism has been growing. Since peaking at 9.1 percent in June 2022, year-over-year inflation has dropped more or less steadily. It was 3.2 percent in July. But the economy, though growing more slowly than it did during the boom that followed the pandemic recession of 2020, has defied the squeeze of increasingly high borrowing costs. The gross domestic product — the economy’s total output of goods and services — rose at a respectable 2.1 percent annual rate from April to June. Consumers continued to spend, and businesses increased their investments.

The Fed wants to see hiring decelerate because strong demand for employees tends to inflate wages and feed inflation.

So far, the job market has been cooling in the least painful way possible — with few layoffs. The unemployment rate is expected to have stayed at 3.5 percent in August, barely above a 50-year low. And the Labor Department reported Thursday that the number of Americans applying for unemployment benefits — a proxy for job cuts — fell for a third straight week.

“Employers aren’t wanting to let their existing talent go,’’ Frankiewicz said.

Instead of slashing jobs, companies are posting fewer openings — 8.8 million in July, the fewest since March 2021. And Americans are less likely to leave their jobs in search of better pay, benefits and working conditions elsewhere: 3.5 million people quit their jobs in July, the fewest since February 2021. A lower pace of quits tends to ease pressure on companies to raise pay to keep their existing employees or to attract new ones.

Average hourly earnings aren’t growing as fast as they did last year, either: In March 2022, average wages were up 5.9 percent from a year earlier. In August, they’re expected to be up just 4.4 percent, the same as in July. 

The lead U.S. economist at Oxford Economics, Nancy Vanden Houten, noted, though, that annual average pay increases need to slow to around 3.5 percent to be consistent with the Fed’s 2 percent inflation target.

Still, economists and financial market analysts increasingly think the Fed may be done raising interest rates: Nearly nine in 10 analysts surveyed by the CME Group expect the Fed to leave rates unchanged at its next meeting, on September 19 and 20.

Despite what appears to be a clear trend toward slower hiring, Friday’s jobs report could get complicated. The reopening of school can cause problems for the Labor Department’s attempts to adjust hiring numbers for seasonal fluctuations: Many teachers are leaving temporary summer jobs to return to the classroom.

And the shutdown of the big trucking firm Yellow and the strike by Hollywood actors and writers are thought to have kept a lid on August job growth.

Associated Press