US job growth misses expectations, offers cautionary note for Fed

A job-seeker completes an application at a career fair in Philadelphia on July 25, 2013. Job growth in the United States was less than expected last month and the unemployment rate hit a 4-1/2 year low as Americans gave up the search for work, c
A job-seeker completes an application at a career fair in Philadelphia on July 25, 2013. Job growth in the United States was less than expected last month and the unemployment rate hit a 4-1/2 year low as Americans gave up the search for work, complicating the Federal Reserve's decision on whether to scale back its massive monetary stimulus later this month. -- FILE PHOTO: REUTERS

WASHINGTON (REUTERS) - Job growth in the United States was less than expected last month and the unemployment rate hit a 4-1/2 year low as Americans gave up the search for work, complicating the Federal Reserve's decision on whether to scale back its massive monetary stimulus later this month.

Non-farm payrolls increased 169,000 last month, the Labour Department said on Friday, adding to signs that US economic growth might have slowed a bit in the third quarter. The unemployment rate fell to 7.3 per cent, the lowest since December 2008.

US financial markets took the generally weak report as a sign the Fed was less likely to make an announcement on the future of its bond buying programme at its meeting this month.

"Even the Federal Reserve would conclude that the employment trend is moderating and for that reason alone they probably will have second thoughts about tapering bond purchases this month,"said Mr Cary Leahey, a senior adviser at Decision Economics in New York.

The employment report will be scrutinised by policymakers from the US central bank at their meeting on Sept 17 to 18. They had been widely expected to make an announcement on the future of its US$85 billion (S$109 billion) per month bond-buying programme at that meeting.

Fed officials have made clear that they would base their decision on the progress the labour market has made since they launched their third round of "quantitative easing" a year ago. When they pulled the trigger, they were looking at a jobless rate that stood at 8.1 per cent.

The employment report suggested the US economy was struggling to regain momentum after stumbling early in the third quarter. Consumer spending, home building, new home sales, durable goods orders and industrial production all weakened in July.

The US economy grew at a 2.5 per cent annual pace in the April-June period. Many economists had expected an acceleration in momentum in the second half of the year.

The employment report is at odds with other data that have shown signs of improvement in labour market conditions. The number of Americans filing new applications for jobless benefits is near five-year lows. A gauge of service sector employment released on Thursday hit a six-month high in August.