Unemployment rate edges up, job growth slows

Many economists expect the Fed to hold an important interest rate at 5.25 percent next week, extending a more than yearlong breather for borrowers. Before that, the central bank had boosted rates for two years to thwart inflation.

Fed Chairman Ben Bernanke and his colleagues, however, still believe inflation is a potential threat to the economy. One of the things they are watching closely is whether the sturdy labor market — which has allowed some workers to command higher wages and benefits — could add inflationary pressures.

Out-of-control inflation shrinks paychecks, erodes purchasing power and eats into the value of investments.

Job growth in May and June turned out to be slightly weaker than the government previously thought.

The economy added 126,000 jobs in June, fewer than the 132,000 first reported. In May, employers boosted payrolls by 188,000, versus 190,000 previously estimated.

The job market still remains strong, but the toll of housing slump, seesawing economic activity and high energy prices are catching up with employers.

Construction companies slashed 12,000 jobs in July. Manufacturers shed 2,000 and retailers cut a thousand. Some 28,000 government jobs were eliminated. In contrast, education and health care added 39,000. Leisure and hospitality expanded employment by 22,000. Professional and business services added 26,000 new positions.

The 4.6 percent jobless rate was the highest since January, when the unemployment rate also stood at 4.6 percent.

At the start of this year, the economy nearly stalled, growing at a pace of just 0.6 percent, the slowest in more than four years. The economy rebounded in the April-to-June quarter, logging a rate of 3.4 percent, the best in more than a year. Growth in the July-to-September quarter is expected to be more subdued, possibly just under 3 percent.

Across the country, the time it took to find a job grew.

The average time the 7.1 million unemployed people spent in their job searches was 17.2 weeks in July, up from 16.8 weeks in June.

Worries about the sour housing market along with fears that problems with higher-risk subprime mortgages will spread, caused stocks to crater last week. The carnage left the Dow Jones industrials down more than 585 points, its worst week in five years. Stocks have gyrated since then, reflecting lingering anxiety among investors.

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