The slowdown in job growth in August is likely to spoil the case for the Federal Reserve to start reversing its easy-money policies at its next policy meeting, but steady hiring could still lead officials to begin reducing their bond purchases later this year.

At their most recent meeting on July 27-28, Fed officials indicated they were on track to begin scaling back their easy-money policies later this year. A strong July employment report in the days that followed led some reserve bank presidents to call for the Fed to reduce, or taper, its $120 billion in monthly bond purchases at its  meeting this month.

But that was before the Delta variant sent Covid-19 infections and hospitalizations rising in many states to their highest levels in months. Hiring slowed sharply in August as a result.

Employers added 235,000 jobs in August, the Labor Department reported Friday. That was below economists’ expectations and below the average of more than 876,000  jobs a month between May and July. That has produced steady declines in the unemployment rate, which fell to 5.2% in August from 5.4% in July and 5.9% in June.

Hiring rebounded this summer, with especially large gains in the hospitality and leisure industries, and Friday’s report showed overall hiring in June and July was even stronger than initially reported. But in August, net hiring was unchanged in leisure and hospitality after adding 350,000 jobs a month over the prior six months.

Federal Reserve chairman Jerome Powell has spoken optimistically in recent weeks about the labor market’s prospects.

Photo: Jose Luis Magana/Associated Press

Despite the hiring slowdown, income data pointed to underlying strength and underscored the increased demand for workers. Average hourly earnings in August rose strongly, up 0.6% from the prior month and 4.3% from one year earlier. Aggregate weekly earnings have risen at a nearly 10% annualized rate over the last three months.

Fed officials are paying close attention to hiring to determine when to start tapering their asset purchases. In projections prepared for their meeting in June, most officials thought the unemployment rate would average between 4.4% and 4.8% over the final three months of this year.

The Fed cut interest rates to zero last year and began purchasing $80 billion a month in Treasury securities and $40 billion in mortgage securities to provide added stimulus. Officials in December said they would want to see “substantial further progress” since then toward meeting their goals of inflation that averages 2% over time and labor market conditions consistent with full employment.

Core prices, which exclude volatile food and energy costs, rose 3.6% in July from a year earlier, according to the Fed’s preferred gauge, the personal-consumption expenditures price index. That was the highest rate in 30 years. Rising prices this spring and summer have largely reflected disrupted supply chains, temporary shortages and a rebound in travel.

Many officials, including Fed Chairman Jerome Powell, said they judged at the July meeting that the Fed had met the threshold for their inflation objective, but they were waiting to see more progress on hiring.

They had hoped they would be getting a clearer read on the labor market by the end of the summer, as more schools reopened with in-person learning and as enhanced unemployment benefits expire next week.

Instead, the surge of infections and hospitalizations, particularly in states with lower vaccinations rates, has created a new headwind for service-sector industries that rely on human contact and businesses that cater to office workers and corporate events.

Mr. Powell has spoken optimistically in recent weeks about the labor market’s prospects, pointing to job openings and resignations that are at record highs.

“With vaccinations rising, schools reopening, and enhanced unemployment benefits ending, some factors that may be holding back job seekers are likely fading,” Mr. Powell said last week. While he acknowledged the short-term risk posed by Delta, he concluded, “the prospects are good for continued progress toward maximum employment.”

A classroom in New Orleans last month. Many schools are reopening with in-person learning.

Photo: kathleen flynn/Reuters

Mr. Powell gave little indication that the central bank was preparing to reduce asset buying after the September meeting but indicated a reduction was likely this year. After the Fed began discussing plans to reduce asset purchases at its meetings in June and July, Mr. Powell said the Fed would provide “advance notice” of any taper. Officials could discuss at their Sept. 21-22 meeting whether to provide such a stronger signal around their intentions.

Some officials argued last month that the Fed would be in a position to not only announce the asset-purchase taper at that meeting but also to start reducing purchases immediately after. Some of those officials, however, said that policy case rested on the economy adding nearly as many jobs as the 1.05 million increase in July.

Other officials have said that they wanted to see more hiring data before concluding that the economy had met the “further substantial progress” benchmark they laid out last year. The Fed will see one more monthly employment report before its Nov. 2-3 meeting, and an additional two more hiring reports by the time of its Dec. 14-15 meeting.

Waiting to taper until November or December also should give the Fed enough time to see how the White House and Congress resolve a coming standoff over how and when to raise the federal borrowing limit.

Write to Nick Timiraos at nick.timiraos@wsj.com