The US generated just 96,000 jobs last month, heightening fears that the economy may run out of steam towards the end of the year.
The disappointing figures - the last before the presidential election - will provide ammunition for Senator John Kerry, the Democrat challenger, and mean that President George W Bush will run on the worst employment record since Herbert Hoover in 1932.
Not only was the overall job creation figure well below analysts' expectations for a gain of more than 150,000, but employment growth in the private sector was even weaker. For the past three months, companies have expanded payrolls by an average of just 65,000 a month.
The unemployment rate remained steady at 5.4 per cent. However, economists said this reflected a fall of 221,000 in the workforce with some Americans abandoning their search for employment.
The Republican Administration has emphasised that payrolls have been growing this year and that unemployment remains low by historical standards. But the latest figures will be a source of discomfort to Mr Bush ahead of last night's second presidential debate and less than 30 days from the election.
Since he came to power in January 2001, 1.6 million private sector jobs have been lost and the pain has been felt most acutely in some of the swing states such as Ohio, Michigan and Wisconsin.
Mr Kerry stressed yesterday that high paying manufacturing jobs were being replaced by lower quality positions. "Even the modest numbers of jobs created are paying $9,000 less than the jobs being lost, and are too often without healthcare and pension coverage that working families need," he said.
Economists expect the economy to grow by more than 4 per cent annualised between July and September. But many worry that the combination of lacklustre employment growth and the rise in the price of oil above $50 a barrel may lead to a slowdown later in the year.
The data showed average hourly earnings rising at just 2.4 per cent over the past year - less than the 2.7 per cent inflation rate for August.
With no new tax cuts on the way and interest rates set to rise further, economists believe that wage growth will need to accelerate in order to prevent an eventual slowdown in consumer spending. - (Financial Times Service)
