Lacklustre US employment lessens tapering fears

US unemployment fell slightly to 7.4 per cent in July, a smaller drop than expected, fueling fears that the Federal Reserve will reduce its liquidity support to markets in the next few months.

But the economy also added 162,000 jobs, according to non-farm payrolls released by the US Labor Department, fewer than economists were expecting.

While the Federal Reserve decided to maintain its asset purchases at $85bn a month at its meeting earlier this week, chairman Ben Bernanke said earlier in the year it would consider adjusting the programme of liquidity based on the strength of economic indicators, with employment among the most important.

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Elsewhere, recent data showed that the US economy grew by a surprisingly strong 1.7 per cent in the second quarter, leaving an overall mixed picture of the state of the economy.