The US economy added a modest 88,000 jobs in April, the slimmest gain in more than two years, and the unemployment rate edged up, the government said on Friday in a report that showed weaker economic growth taking a toll on the job market.
The Labour Department said the jobless rate ticked up to 4.5 percent from 4.4 percent in March, suggesting the labour market has finally begun to weaken following tepid economic growth in the first three months of 2007.
The report is likely to give comfort to Federal Reserve policy makers, who had been worried a low unemployment rate could fuel a rise in wages that could push inflation higher. The Fed's rate-setting policy committee meets next week.
An auction of financial derivatives early on Friday showed traders were betting on a trimmer 80,700 gain in jobs, and the market response to the report was muted.
Prices for US stocks and government bonds edged up and the dollar fell. US interest rate futures showed market participants saw the data as slightly increasing the chance the Fed would lower benchmark interest rates later in the year.
"The Fed will probably hold rates steady on this type of news," said Gary Thayer, chief economist at A.G. Edwards and Sons in St. Louis.
Adding to the picture of a slightly less robust jobs market, the government revised down its count of jobs created in March by 3,000 and in February by 23,000.
The report also showed average hourly earnings rose only modestly last month, further supporting a view of less-tight labour conditions. The 12-month gain in earnings slipped to 3.7 percent, the smallest increase since last May.
"Wage inflation looks like it's starting to subside," Thayer said. Significant job losses in April came in general merchandise stores, where employment dropped by 41,000, and credit intermediation, where jobs fell by 14,000, the department said.
Factory employment fell by 19,000, the 10th straight monthly decline. Meanwhile, construction employment slipped 11,000 after a gain of 50,000 in March. There has been almost no change in construction employment this year.
Analysts had been puzzled, before the April jobs report, on why the unemployment rate had been drifting down despite signs of a slowing economy.
The Fed has worried that a tight labour market could create an inflationary spark, but has said that sub-par economic growth should eventually help price pressures ease.
While economic growth has slowed sharply, the US central bank has made clear that its main concern is that inflation might fail to moderate, and it has held benchmark interest rates steady since raising them to 5.25 percent in June.
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