FINANCIAL markets responded enthusiastically yesterday to weak US jobs figures which indicated that the economy could be slowing after buoyant growth.
The US Labour Department said non farm employment fell by 40,000 last month, after gains of more than 200,000 in preceding months. Economists had projected an increase of about 160,000.
The jobless rate edged up from 5.1 per cent to 5.2 per cent, but remained below its average in recent months.
Bond and share prices rose sharply in early trading on Wall Street, where the figures were seen as lessening the risk that the Federal Reserve might raise interest rates to reduce upward pressure on inflation.
By early afternoon the benchmark 30 year Treasury bond was up 1 1/8 to yield 6.742. The Dow Jones Industrial Average closed up 60.01 points at 5992.86, having risen 50 points in earlier trading.
European markets, which had been nervous ahead of publication of the data, rebounded with relief, capping a record breaking week.
Analysts said the weak figures showed there was little danger of the US economy overheating. Signs that growth Was slowing from an annual rate of 4.7 per cent in the second quarter would reduce pressure on the Fed to tighten monetary policy after next month's presidential election.
The drop in employment was the first since January but may partly have reflected poor seasonal adjustments. Government employment fell 81,000, mainly because the expected seasonal gain in teaching jobs failed to appear. Officials said more teachers were now employed during the summer months, reducing the usual jump in September.
However, growth of private sector employment was also weak. Manufacturing employment fell 57,000 last month, with the largest declines in industrial machinery and transport equipment. Service sector hiring as sluggish, especially in retailing and business services.
Economists warned against reading too much into one month's data. Employment has risen steeply this year with average monthly gains exceeding 200,000. Occasional declines in such periods are not uncommon.
Other aspects of the jobs report pointed to steady economic growth. Average earnings rose 0.5 per cent last month.
