* U.S. job growth slowed sharply in August * Milder weather on tap for much of the nation * Isaac storm shut-ins slowly returning to service * Coming up: Baker Hughes gas drilling rig data Friday By Eileen Houlihan NEW YORK, Sept 7 (Reuters) - U.S. natural gas futures slid more than 3 percent early Friday, extending losses for a third straight day, as milder autumn weather was expected to curb any late-season cooling or early-season heating demand. In addition, a U.S. Labor Department report on Friday showed jobs growth slowed sharply last month, setting the stage for the Federal Reserve to take new steps to stimulate the economy. Shut-in gas from Hurricane Isaac has also been returning to service over the past few days, with few reports of damage from the storm. Isaac came ashore in southeastern Louisiana on Aug. 28, shutting more than 70 percent of offshore U.S. natural gas production, or more than 3.26 billion cubic feet per day, for most of last week. By Thursday, only 21.28 percent of offshore gas production, or 958 million cubic feet, remained off line, a government report showed. Some traders said strong nuclear outages could help support gas prices over the low-demand, autumn "shoulder" period, but most expect futures to have a hard time breaking back above $3 per million British thermal units, the level at which gas loses much of its appeal over coal for power generation. As of 9:21 a.m. EDT (1321 GMT), front-month October natural gas futures on the New York Mercantile Exchange were at $2.686 per mmBtu, down 9 cents, or just over 3 percent. The nearby contract peaked at $3.277 in late July, its highest mark since December. The National Weather Service's six- to 10-day outlook issued on Thursday called for mostly normal temperatures in consuming regions in the Northeast and Midwest and below-normal readings in Florida and along the West Coast. Above-normal readings were on tap for other parts of the West and in New England. On the nuclear front, outages totaled 6,900 megawatts, or 7 percent of U.S. capacity, on Friday, down from 8,200 MW out on Thursday and 8,500 MW out a year ago, but up from a five-year outage rate of 5,600 MW. SMALL WEEKLY BUILD BUT STORAGE STILL BLOATED Shut-in offshore Gulf of Mexico production from Isaac curbed this week's inventory build and should do the same to next week's injection, traders said. Thursday's storage report from the U.S. Energy Information showed domestic gas inventories rose last week by 28 billion cubic feet to 3.402 trillion cubic feet. The build was below Reuters poll estimates for a 36 bcf build and well below the year-ago gain of 62 bcf and the five-year average increase for the week of 60 bcf. (Storage graphic: link.reuters.com/mup44s) It was the 18th time in 19 weeks that the weekly inventory build came in below the seasonal norm, having only exceeded the norm last week. While a huge inventory surplus from the start of the injection season has been sliced by more than half, storage remains 395 bcf, or 13 percent, above last year's levels and 329 bcf, or nearly 11 percent, above the five-year average level. Stocks are at levels that still offer a huge cushion that can help offset any weather-related spikes in demand or further supply disruptions from storms. There are still concerns that the storage overhang could drive prices to new lows if stocks climb to levels that test the government's 4.1 tcf estimate of capacity. Early injection estimates for next week's EIA storage report range from 25 bcf to 65 bcf versus a year-earlier gain of 80 bcf and a five-year average build of 72 bcf for that week. DRILLING RIGS SINK TO 13-YEAR LOW Traders were waiting for the next Baker Hughes gas drilling rig report, expected late Friday. Last week's data showed the number of rigs drilling for natural gas in the United States slid by 13 from the prior week to a 13-year low of 473. (Graphic: r.reuters.com/dyb62s) The count was down for the 13th time in 15 weeks. The nearly steady decline in gas-directed drilling over the last 10 months has fed expectations that producers were getting serious about stemming the flood of record supplies. But so far there is little evidence that gas output is slowing. (Reporting by Eileen Houlihan; editing by John Wallace)

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