Job gains slowed and the workweek shrank in July, but the latest slowdown wasn't seen as weak enough to change the Federal Reserve's stance on tapering stimulus later this year.
Payrolls expanded by 162,000, the Labor Department said Friday. That fell short of expectations for 175,000. Meanwhile job growth in June and May was revised down a combined 26,000.
The unemployment rate fell to a 4-1/2-year-low 7.4% from 7.6%, according to a separate household survey. While more people found jobs, the labor force also dipped, sending the participation rate back down to 63.4% from 63.5%, close to longtime lows.
Despite July's disappointing payroll increase, the six-month average remains near 200,000, said Tom Porcelli, chief U.S. economist at RBC Capital, in a research note.
"The Fed takes a holistic view of job gains, and the six-month pace is still in line with their goal.
U.S. stock indexes rose modestly. The 10-year Treasury yield fell 9 basis points to 2.60%. That's up a full point since QE taper speculation picked up in early May.
Other employment report details point to additional fragility in the labor market recovery.
The average workweek slid to 34.4 hours from 34.5 hours. The average hourly wage fell to $23.98 from $24. Wages for rank-and-file workers were flat at $20.14.
Chronically low earnings growth has been due in part to heavy part-time hiring, which some companies are relying on to avoid ObamaCare mandates on full-time worker coverage.
The household survey showed full-time employment rose by 92,000 last month vs. the 174,000 gain among part-timers.
The employers doing the most hiring also continued to be in low-wage sectors. Retailers added 46,800, the most since November — though the retail workweek fell back to a three-year low of 30 hours. Food-service hiring picked up to 38,400.
Construction companies shed 6,000. Manufacturers created 6,000 jobs, but that was led by the auto sector, where seasonal adjustment problems have skewed July jobless claims data.
The numbers show a muted, inconsistent recovery that is unlikely to spur aggressive tapering by Fed policymakers, said Matthew Kaufler, portfolio manager at Federated Investors.
"The economy continues to grind forward," he said.
Other data out Friday indicate the central bank still has plenty of inflation leeway to pump more money into the economy.
The personal consumption expenditures index accelerated to a yearly pace of 1.3% in June from 1.1% in May, while core PCE growth stayed at 1.2%. Both remain well below the Fed's 2.5% threshold.