(Reuters) -Federal Reserve policymakers got a green light to start a round of interest rate cuts this month after a government report on Friday showed U.S. employers added far fewer workers than economists had expected in August and July.

Nonfarm payrolls increased by 142,000 jobs last month after a downwardly revised rise of 89,000 in July, the Labor Department said. Economists polled by Reuters had forecast payrolls would increase by 160,000 jobs after a previously reported gain of 114,000 in July.

To Inflation Insights President Omair Sharif, the takeaway for the Fed was clear.

"Time to cut 50 bps," Sharif said, referring to his expectation that the Fed will cut rates at its Sept 17-18 meeting by an upsized half of a percentage point, and not the smaller quarter-percentage-point move expected by most analysts in the run-up to Friday's report.

The three-month average monthly payroll rise is now down to 116,000, far less than the 200,000 that analysts say is needed to meet current job-growth needs in a population that has swelled through immigration.

For two of those months, Sharif said, the payroll gain was small enough that it could be a figment of statistical noise. "In other words, we don't know if payrolls were any different than zero in two of the last three months," he said.

Traders of futures that settle to the Fed's policy rate are now pricing a 35% chance that the U.S. central bank will cut its policy rate, currently in the 5.25%-5.50% range, by 50 basis points at its meeting in two weeks. Shortly after the release of the jobs report, the odds of such a move had risen to 55%.

But the jobs report also showed the unemployment rate eased to 4.2% from 4.3% in July, and analysts remained divided on whether the slowdown would trigger an aggressive Fed response on rates out of the gate.

"It is clear that the employment market is slowing down, and the Fed has to start to move," said Eugenio Aleman, chief economist at Raymond James, who believes the first rate cut will be a quarter-percentage-point move.

"But the sky is not falling, the floor is not shaking ... and making a 50-basis-point cut will send an incorrect signal to the market" that the economy is falling apart, he said. "And they don't want to do that."