The US added 142,000 jobs in August, the lowest figure this year and one that ends a streak of months in which the economy added more than 200,000 new positions.
The labour department's figures came as a surprise. Analysts polled by Reuters had expected a gain of about 225,000. They correctly anticipated that the unemployment rate would fall to 6.1%, down from 6.2% and close to a six-year low. The US had added an average of 212,000 jobs each month over the prior 12 months.
August's growth also did little to impact those worst hit by the recession. The unemployment rate for African Americans remained unchanged at 11.4%, more than twice the rate for white people, and Hispanic unemployment stayed flat at 7.5%. Teenage unemployment remained at 19.6%.
The labour-force participation rate – which measures the percentage of the US population who are either working or looking for work – fell to 62.8% in August from July's 62.9%.
The August rate matches the lowest level since the late 1970s and suggests many people may have given up looking for work. The dip is the likely explanation for the marginal fall in the unemployment rate.
Investors reacted by selling shares and sending stock markets into reverse. The falls, while modest, ended a month-long surge in values in the US and across Europe. The FTSE 100 finished down 25 points at 6852. The US Dow Jones index fell to 17053 in early trading, down 16 points at 1700 BST.
A two-month slide in the value of the dollar against a basket of currencies continued in response to the figures. Against the pound the dollar slipped to $1.63 compared to a year high of $1.71, which followed a 1.6% dive against the euro on Thursday to $1.29.
The news was all the more surprising following a report on Friday from ADP, the US's largest payroll firm. According to its monthly tally of private sector hirings the US added 204,000 jobs in August, the fifth straight month of employment gains above 200,000.
While the monthly number was disappointing, the longer-term trend remains positive. Gains now average 207,000 over the last three months.
July's gain was revised up slightly to 212,000 from an earlier estimate of 209,000, though June's gain was revised down to 267,000 from an earlier estimate of 298,000.
Brian Jones, US analyst at Société Générale, said the weak jobs figures would allow the Federal Reserve boss Janet Yellen to keep critics of the central bank's low interest rate policy at bay.
"The lack of any pickup in headline wage growth, combined with the more sanguine inflation readings over the summer, suggests no urgency to revise the statement just yet.
"[Yellen] may acknowledge that a large part of the decline in the participation rate is structural, but is unlikely to abandon her longstanding thesis that there is still significant cyclical slack in the labour market," he said.
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