US employers added 146,000 jobs in June, below Wall Street forecasts, but the unemployment rate fell to its lowest point since September 2001, as few joined the labour force, a government report showed yesterday.

June's tepid employment growth fell short of analyst expectations for 188,500 new jobs.

But the decline in the unemployment rate to 5 per cent was a nice surprise, since Wall Street had expected it to hold at 5.1 per cent. The drop was mostly due to a paltry 1,000 increase in the work force, which includes those looking for work as well as those who have jobs.

"It's enough to keep the wolves at bay but not enough to get excited about," said Michael Jansen, currency strategist at National Australia Bank in New York.

The Labour Department revised up job growth in April and May to 292,000 and 104,000, respectively, boosting the two-month count by 44,000.

Economists said the rise in hiring suggested an economy growing at a rate of about 3 per cent - strong enough to reassure the Federal Reserve that a spring "soft patch" had evaporated but not enough to spark inflation worries.

"It's very consistent with an economy that is growing at or just below trend. It does not change anything for the Fed - they're going to raise rates again next month," said Steve Ricchiuto, chief US economist at ABN Amro in New York.

Factory payrolls shrank for the fourth straight month as vehicle assembly and parts plants cut back on production. Bloated inventories have prompted many motor manufacturers to slow production lines until demand can catch up. Some 96,000 manufacturing jobs have been lost since August 2004.

While 18,000 new workers were hired in the construction industry last month, most of June's employment growth came in the service sector. Professional and business services jobs rose 56,000, education and health services were up 38,000 and leisure and hospitality payrolls grew 19,000.