U.S. job numbers raise doubts about recovery.

Wall Street taken by surprise

• U.S. employers slammed the brakes on hiring over the last two months, raising new doubts the economy is strong enough for the Federal Reserve to raise interest rates by the end of this year.

Payrolls outside of farming rose by 142,000 last month and August figures were revised sharply lower to show only 136,000 jobs added that month, the Labor Department said on Friday.

That marked the smallest twomonth gain in employment in over a year and could fuel fears that the China-led global economic slowdown is sapping America’s strength.

“You can’t throw lipstick on this pig of a report,” said Brian Jacobsen, a portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisc.

The weak job growth took Wall Street by surprise and U.S. stocks sold off while the dollar also weakened and yields for government bonds fell.

Bets on interest-rate futures showed investors only saw a 30-percent chance of a Fed rate hike in December, down from just under 50 per cent before the job report’s release.

“(With) a weak report here, in combination with some of the other weakness that we are seeing across the globe, the odds get dinged for December,” said Tom Porcelli, an economist at RBC Capital Markets.

Investors saw virtually no chance the Fed would end its near-zero interest rate policy at its only other scheduled meeting this year, to be held later in October. Futures prices indicated investors were betting the Fed would probably hike in March.

U.S. factories are feeling the global chill and shed 9,000 jobs in September after losing 18,000 in August, according to the Labor Department’s survey of employers.

“We saw events in China lead to some global financial turmoil and you’re seeing that in the data here,” White House chief economist Jason Furman told Reuters.

New orders received by U.S. factories fell 1.7 per cent in August, the Commerce Department said in a separate report. .

Paul Ryan, a top Republican lawmaker in the House of Representatives, said the weak turn in the economy should be a wake-up call for Washington to reform the national economy with new tax laws, freetrade agreements and policies to get people off welfare.

“This recovery continues to disappoint, but we can’t accept it as the new normal,” Ryan said.

The recent pace of job growth should have been enough to push the unemployment rate lower because only around 100,000 new jobs are needed a month to keep up with population growth.

But the jobless rate held steady at 5.1 per cent. The unemployment rate is derived from a separate survey of households that showed 350,000 workers dropping out of the labour force last month, as well as a lower level of employment.

The share of the population in the workforce, people who have jobs or are looking for one, fell to 62.4 per cent, the lowest level since 1977.

Average hourly wages fell by a cent to US$25.09 during the month and were up only 2.2 per cent from the same month in 2014, holding around the same levels seen all year.

The report did have a few bright spots that might be welcomed by Fed chair Janet Yellen, who said last week the economy was doing well enough to warrant higher rates this year.

The number of workers with parttime jobs but who want more hours fell by 447,000 in September to 6 million. Yellen has signalled that the elevated number of these workers points to hidden slack in the labour market.