US EMPLOYMENT fell for a third straight month in August, but the drop was far less than expected and private hiring surprised on the upside, easing pressure on the Federal Reserve to prop up economic growth.

Non-farm payrolls fell 54,000, the Labor Department said yesterday, helping assuage fears of a double-dip recession in financial markets that had looked for a drop of 100,000 jobs.

However, the data did little to take the political heat off President Barack Obama over his handling of the economy or improve the Democratic Party’s chances in November’s mid-term congressional elections.

“The recovery may be wobbly but it is still staggering forward,” said Nigel Gault, chief US economist at IHS Global Insight in Lexington, Massachusetts.

“The figures take some of the pressure off the Fed to do something quickly to shore up the recovery, but they won’t help the administration as the mid-term elections approach.”

While the data dampened concerns the recovery could stall, a second report showing growth in the dominant services sector hit a seven-month low in August underlined the economy’s sub-par performance.

Employment last month was dragged lower as the government let go 114,000 temporary census workers. Private employment, considered a better gauge of labour market health, increased 67,000 after an upwardly revised 107,000 gain in July. Markets had expected a rise of only 41,000 in August.

In addition, the government revised payrolls for June and July to show 123,000 fewer jobs lost than previously reported.

Stocks on Wall Street rose on the data, while prices for safe-haven US government debt fell for a third straight day as traders saw the odds of a contraction in growth lessening.

The dollar rallied against the yen and euro.

Concerns of a double-dip recession had already diminished somewhat this week as data showed strength in manufacturing and increases in consumer spending. However, the sluggish pace of growth has kept investors on edge. – (Reuters)