Employers add jobs but consumers gloomy

WASHINGTON (Reuters) - U.S. employers added 94,000 jobs in November and the unemployment rate held steady, the government said on Friday in a report suggesting the U.S. economy was slowing, but not tumbling into recession.

In Wall Street's eyes, the signs of steady if somewhat tepid job growth buttressed the case for only a modest interest rate cut from the Federal Reserve next week, not the large half-percentage point reduction some had begun to expect.

A separate report, however, showed U.S. consumers' mood grew darker in December, while another suggested consumer credit tightened in October in the wake of financial market strains.

"Current employment gains are not robust, but sufficient to keep the consumer out of serious trouble," said Stephen Gallagher, chief U.S. economist for Societe Generale in New York, noting that Americans were battling with slumping home prices and soaring energy costs.

Major U.S. stock indexes closed little changed, but prices for U.S. government bonds fell as investors saw the data making a quarter-point rate cut from the Fed on Tuesday the most certain outcome.

The Labor Department said the unemployment rate was unchanged at 4.7 percent in November, but it substantially revised its estimates for job growth in the two prior months to show a less vigorous pace of hiring.

The department said 170,000 jobs were added in October instead of 166,000 it reported a month ago and slashed its estimate for September new jobs to 44,000 from 96,000 -- a net decrease of 48,000 over the two months.

Separately, the Reuters/University of Michigan consumer sentiment index fell to 74.5 this month from 76.1 in November. Excluding a reading in October 2005, shortly after Hurricane Katrina devastated the Gulf Coast region, it was the lowest level in 15 years.

It also marked a third straight monthly fall in confidence and signaled growing worry on price increases even as the economy cools.

"The Fed is going to keep cutting rates to save the economy, but inflation still remains an issue, at least for the consumer," said Peter Boockvar, an equity strategist with Miller Tabak & Co. in New York. Economic conditions were becoming "stagflationary," he added, with sluggish growth and troublingly high inflation.

JOB GAINS "NOT TOO HOT, NOT TOO COLD"

The revised September job-creation figure was the weakest in more than 3-1/2 years, but the November payrolls increase came in slightly ahead of Wall Street forecasts.

"Not too hot, not too cold," said Hank Smith, chief investment officer for equity management with Haverford Investment in Radnor, Pennsylvania.

"This assures a rate cut for next week," he added, but it may be aimed less at stimulating economic activity and more at breathing confidence into battered credit markets.

The jobs report showed a loss of 33,000 jobs in goods-producing industries in November. Construction firms cut 24,000 workers from their payrolls, the fifth straight monthly contraction, and factories dropped 15,000.

Separately, the Federal Reserve said loans for big-ticket items fell in October for a second straight month, the first back-to-back decline since 1992.

Non-revolving credit, which includes closed-end loans for items like cars, boats, college educations and holidays, fell $1.64 billion, or 1.3 percent, to $1.56 trillion, suggesting either that lending conditions were tightening or consumers retrenching.

Overall consumer borrowing, however, rose by $4.71 billion in October, the Fed said.