"There is no sudden emergence of weakness, but the market is cheered by the idea of a gradual slowing down in the economy," said Christopher Low, an economist at HSBC Markets in New York.
President Bill Clinton said the figures showed that America had "the economic equivalent of our dream team - strong growth, millions of jobs, low inflation, low unemployment and growing incomes".
There were 193,000 new non-farm jobs in July, not enough to prevent a small increase in the unemployment rate to 5.4 per cent. This compared with monthly employment increases well in excess of 200,000 during the past six months, which have triggered sharp dives in share prices on four occasions.
"An increase of 193,000 jobs isn't bad, but it is not overheating. This has much reduced the likelihood that the Fed will raise interest rates," said Ian Harwood, international economist at Kleinwort Benson. The central bank's policy-making committee meets next on 20 August.
The Dow Jones index rose in reaction, closing up 85.08 points at 5,679.83. The benchmark long Treasury bond soared to its highest level for four months, yielding 6.74 per cent.
The details of yesterday's monthly employment report were almost entirely reassuring as far as inflationary pressures are concerned. Average earnings per hour fell by 2 cents to $11.80 (pounds 7.65), partly chipping away the previous month's 9 cents jump. The annual rate of wage inflation has dropped back to just under 2.9 per cent. Average weekly hours fell slightly.
The job creation took place almost entirely in the service industries, especially retailing. It took on 89,000 people out of the total of 192,000 in services, about half of them in eating and drinking establishments. The Labor Department said the Olympic Games in Atlanta probably explained about 10,000 of the new posts, although much of the Olympic hiring would not show up until the August figures were published.
There were smaller rises in employment in construction and the public sector. But manufacturing shed 20,000 workers, confirming the evidence of Thursday's survey from the National Association of Purchasing Managers. It indicated an unexpected drop in the pace of expansion in manufacturing.
Other figures yesterday also pointed to a moderation in the pace of growth. New orders for manufactured goods fell 0.9 per cent in June. The drop would have been steeper but for an increase in military orders.
June also saw American consumers cut back on spending even though the month's increase in personal incomes was the biggest for more than a year. Incomes were up 0.9 per cent but spending fell by 0.2 per cent.Reuse content