By Glenn Somerville
WASHINGTON, Aug 4 (Reuters) - U.S. employers added a fewer-than-expected 113,000 jobs in July and the unemployment rate jumped unexpectedly to 4.8 percent, confirming a slowing economy and igniting hopes for an interest-rate pause by the Federal Reserve.
Analysts said the key Labor Department jobs report on Friday has made it easier for Fed policy-makers to halt a two-year campaign of interest-rate rises when they meet on Tuesday.
Average hourly earnings continued to rise last month, despite signs of developing slack in the labor market.
The unemployment rate rose to its highest since a matching 4.8 percent in February, contrary to Wall Street economists' forecasts that it would be unchanged from June's 4.6 percent.
"There is no doubt this number has given the market the feeling the Fed is not going to raise rates on Tuesday," said Kevin Flanagan, a bond strategist with Morgan Stanley in Purchase, New York.
Bill Gross, the chief investment officer at Pacific Investment Management Co. (PIMCO) in Newport Beach, Calif., predicted flatly: "The Fed will definitely pause on Tuesday."
A Reuters poll, conducted after the employment data was issued and influenced by it, found 17 of 22 of the biggest Wall Street firms foresaw the Fed keeping rates on hold on Tuesday.
Stock prices rose strongly in early trading (4 Aug 2006) but, by the end of the day, optimism about a cap on rate hikes gave way to gloom that slower growth might mean weaker corporate profits.
Analysts had forecast a more robust 142,000 new jobs would be generated in July. The department revised June's new-job total up to 124,000 from a previously reported 121,000 and said that in May 100,000 jobs were created rather than 92,000.
Some analysts said the wage rises might give Fed policy-makers cause to worry that the inflationary impact of costlier labor has not made its way through to prices yet. If so, the U.S. central bank might want to raise rates again.
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