The US economy added 113,000 new jobs last month, fewer than expected, and this pushed the jobless rate up to 4.8% from the 4.6% reported in June.

Experts believe the economy has shifted down a gear after a strong first quarter, with house sales cooling.

The jobs data makes it less likely that the US Federal Reserve will raise rates when it meets on Tuesday.

Business reluctance

The Fed has been tightening rates over the past 18 months and persistent fears about rising inflation have led to stock market instability in recent months.

But experts said Friday’s Labor Department figures – which showed a net loss of 15,000 jobs manufacturing jobs – were an illustration of growing caution among businesses.

I would characterise the jobs growth as moderate

Sam Rahman, Baring Asset Management

“Consumers are reluctant to spend and businesses are reluctant to invest,” said Charles Lieberman, chief investment officer at stockbrokers AG Edwards and Sons.

A further hike in rates from their current level of 5.25% – their highest mark for five years – now seems less likely, despite further the increases in the cost of borrowing seen in the UK and the eurozone in recent days.

“I would characterise the jobs growth as moderate,” said Sam Rahman, an investment manager from Baring Asset Management.

“It is consistent with the general slowing in growth we are seeing, but the economy is still expanding. It is likely to put the Fed on hold next week.”

Housing impact

Job figures for May and June have been revised upwards, although not by enough to suggest that the robust growth of early 2006 is continuing.

June saw 124,000 jobs being created – up from the initial 121,000 figure – while May’s number was revised upwards from 92,000 to 100,000.

The number of “non-farm payroll” jobs created last month was not enough to offset those leaving the workforce, resulting in the first rise in unemployment since November.

The housing market – which has helped drive the US economy in recent years – has slowed down in the face of higher borrowing costs.

Fed chairman Ben Bernanke said last month that the economy had begun to slow in June but that he believed the housing market was set for a soft landing.