* Pace of U.S. jobs growth slows but unemployment rate falls
* Data seen making Fed more cautious on tapering stimulus
* U.S. Treasury yields dip, dollar softens
* U.S. stocks decline at the New York open
NEW YORK, Aug 2 (Reuters) - Unexpectedly weak jobs growth in the United States for July weakened the dollar and pushed U.S. Treasury yields and stocks lower on Friday as investors grew more cautious on the outlook for U.S growth and Federal Reserve plans for trimming stimulus.
The number of jobs outside the farming sector increased by 162,000 last month although the unemployment rate fell to 7.4 percent, its lowest in over four years. The result was below the median forecast in a Reuters poll for 184,000 new jobs.
“The report shows that the health of the labor market is improving but at the same time, unhealthy,” said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York. “The stock market is a bit schizophrenic here, because while it does keep the Fed more on the sidelines, it’s not a good sign of our economy. There is this balancing act here where the market wants growth but not too much too soon.”
The Dow Jones industrial average was down 63.39 points, or 0.41 percent, at 15,564.63. The Standard & Poor’s 500 Index was down 4.29 points, or 0.25 percent, at 1,702.58. The Nasdaq Composite Index was down 5.75 points, or 0.16 percent, at 3,670.00.
European shares erased gains that had taken them to a two month high before the data was released, with the FTSEurofirst 300 last little changed.
The benchmark 10-year U.S. Treasury note, which was in negative territory before the report, was up 20/32 afterwards, its yield easing at 2.6322 percent.
The dollar fell against the euro and yen It was last at 99.35 yen, down 0.2 percent, and fell to $1.3261 against the euro zone single currency, a gain of 0.4 percent for the euro.
“This disappointing payroll number will undo some of the positive market momentum on the economy and the dollar ... and justify the Fed’s caution on quantitative easing,” said Joseph Trevisani, chief market strategist for WorldWideMarkets.