Weaker Hiring Hits US Rate Rise Expectations

Job creation in the US economy was at its weakest for seven months in April, easing market expectations the Federal Reserve will announce a further rise in interest rates early this summer.

The US Department of Labor said employers added 160,000 net new jobs last month - well below analysts' estimates above 200,000.

The unemployment rate remained at its post-crisis low of 5%, but the easing - from an average increase of 200,000 over the previous three months - will raise fears that the slowdown in the US economy is discouraging investment and hiring.

President Barack Obama sought to downplay the latest jobs figures.

In a late scheduled news conference, the President told reporters that April was the 74th consecutive month of job growth in the US.

However, he said the global economy is "not growing as fast as it should be".

"You're still seeing lagging growth in places like Europe, Japan and China," Mr Obama said.

"Here in the United States people are still hurting."

He called on the US Congress to take steps he believes will boost the US economy, including raising the federal minimum wage, passing new trade agreements and simplifying the tax code.

The US economy's growth has slumped to a sluggish 0.5% annualised rate as a strong dollar hits exporters and multi-nationals at a time of weaker demand abroad.

However, the jobs report did point to one bright spot in the Fed's focus; average hourly pay rising 2.5% on a year earlier in April from 2%.

The central bank has been mulling its first rise in the benchmark interest rate since last December's increase from its crisis-low of 0%-0.25% to 0.25%-0.5%.

At its most recent meeting last week, it highlighted domestic strengths and rowed back on previous worries it had expressed about the world economy.

The statement was seen as raising the prospect of a rate rise in June though the Fed said it continued to watch developments closely for signs of deeper contagion.

Commenting on the core job creation number Russell Price, senior economist at Ameriprise Financial Services in Michigan, said it was disappointing.

"It does show businesses are more concerned about the economic outlook. Demand has been soft, so businesses are responding to that," he added.

While some commentators agreed the Fed would want to see more evidence of confidence, others saw the report as neutral.

James Smith, developed markets economist at ING, said it was "unlikely to change too many minds" among rate-setters on the timing of the next rate hike.

But he added: "That said, if we were to start seeing a more rapid, sustained downtrend in employment growth over the next few months, this may provide evidence that weakness emanating from the business investment side of the economy, which tends to lead the economic cycle, is starting to filter through to the more lagging labour market."