Weak Sept. Hiring Offset By Revisions, Lower Jobless Rate

Just 51,000 payroll jobs were added last month. Wall Street had predicted 120,000.

But the department ramped up August jobs to 188,000 from 128,000. It also said it would significantly revise upward its jobs estimate for the 12 months ended in March 2006.

Also, the jobless rate, taken from a separate household survey, fell to 4.6%, matching a five-year low.

The revisions and lower unemployment were taken as signs that the U.S. isn't slowing as rapidly as some feared, quieting talk of Federal Reserve rate cuts in early 2007.

"It is consistent with a soft landing," said Richard DeKaser, chief economist at National City Corp. "It moves (the Fed) further away from reducing interest rates anytime soon."

Average hourly earnings rose 0.2% in September. For the third straight month, pay rose 4% vs. a year earlier, the most since 2001.

Stocks fell modestly on the jobs report, perhaps partly in reaction to the bond sell-off. The 10-year Treasury yield shot up nine basis points to 4.70%, the biggest one-day gain in three months.

Fed funds futures show a 19% chance of a rate cut by the Jan. 31 meeting, down from 31% on Thursday and 37% Wednesday. Odds of a rate cut by the March 20-21 meeting were 50% vs. 68% on Thursday and 85% on Wednesday.

Economists expect job and wage growth to taper off in coming months due to slowdowns in the housing and auto sectors. This should help rein in inflation.

The government clouded the jobs picture by saying it'll hike its nonfarm jobs estimate in the year ended in March by 0.6%, or 810,000. That's the biggest upward revision in at least 10 years.

But while the past looks brighter, there was broad weakness in September payrolls. Retailers lost 11,900 jobs. Factories shed 19,000. Temporary jobs -- a leading indicator because firms often shed temps first -- fell 11,300.

All three sectors have cut employment this year, with retail jobs down 104,000.

Overall service jobs, fueled by health care and financial services, grew by 62,000. Like nonfarm payrolls overall, it was the smallest gain since last October.

"Job growth is slowing moderately, not sharply," said Dana Johnson, chief economist for Comerica Bank.

A big question is how far the housing sector will decline, and whether the effects will spill over into other parts of the economy.

Housing-related jobs accounted for much of the hiring in the past five years, while rising home values let consumers tap equity to buy cars, boats and other goods.

Housing starts have plunged to the lowest level in more than three years as sales have dived, the number of unsold homes has surged and prices have declined.

Housing employment is falling. Residential construction jobs slid 16,000 in September, with losses in related fields.