Jobs growth in the US slowed down last month, but the unemployment rate remained near 30-year lows.

The latest US labour department data provided some support for the view that the US economy was slowing down from its rapid rates of growth, as the underlying pace of job creation fell well below the monthly average over the past four years.

But the report, which also showed the strongest factory job growth in more than five years, was not seen as giving a decisive steer on whether the Federal Reserve will raise interest rates when it next meets on August 22nd.

The figures boosted US stocks at the opening and at the close last night, the Dow Jones Industrial Average was up 61.17 at 10,767.75, while the Nasdaq Composite was up 27.48 at 3,787.36.

There was also some relief for the euro which was lodged last night near 90.75 cents, marginally firmer compared to Thursday's US close.

Total non-farm payroll employment fell for the first time in four and a half years in July, dropping by 108,000, the department said. That surprised investors and economists, who had expected, on average, a 75,000 increase. But the loss of 290,000 temporary government jobs caused by the end of the decennial US census led the decline.

Excluding that one-time drop, private-sector employment rose in July, but by only 138,000, significantly below the monthly average of 250,000 posted over the past four years.

Wage gains picked up only slightly and the unemployment rate remained at 4 per cent. Some analysts said the data could reflect a struggle by companies to fill job openings in a tight labor market, rather than a significant slowdown.

Mr Richard Yamarone, chief economist for Argus Research in New York, noted a 46,000 rise in manufacturing payrolls, the biggest monthly gain in factory jobs since November 1994.

"Labour is the most costly expense a firm can take on," he said "You don't add workers if you're uncertain about your future."

Mr Yamarone said the Fed's six interest rate increases since June 1999, designed to slow growth and reduce inflation risks, "are not doing the job".

The Fed has argued repeatedly that strong economic growth and low unemployment could pressage a bidding war for labour and an inflation outbreak. But inflation has remained subdued. Inflation expectations, as measured by the gap between yields on US Treasury bonds and inflation-indexed Treasury bonds (TIPS), have been stable.

After his testimony on monetary policy to the House and Senate banking committees last month, Mr Alan Greenspan, the Fed chairman, took issue with the conventional view on the jobless rate.

"There is a big dispute as to where the inflationary rate of unemployment is. There are those who believe we have already gone beyond the point at which we are creating instabilities," he said. "I personally don't believe that, but the evidence is not yet clear which side is right."