U.S. payrolls growth slowed last month much more than expected, but the prior month was revised up and the unemployment rate fell.

Nonfarm payrolls increased 51,000 in September after growing a revised 188,000 in August and 123,000 in July, the Labor Department said Friday. Previous reports had shown job growth of 128,000 in August and 121,000 in July.

The unemployment rate dipped to 4.6% in September from 4.7% in August. The September unemployment rate was the lowest since June and within the narrow 4.6%-4.8% monthly range seen so far this year. The labor force participation rate was unchanged last month.

Signaling greater labor demand this year, the Labor Department Friday made its preliminary estimate of an upcoming annual benchmark revision to nonfarm-payroll employment, an upward revision three times greater the normal range. The benchmark revision, which matches employment data with state tax records, is expected to be up by 810,000, or 0.6%, for March 2006, compared with a range of 0.2% up-or-down revisions for the prior 10 years.

"Even though the September payroll number was disappointing, labor markets are still very tight and probably too tight for the Fed's comfort," said Scott Brown, chief economist for Raymond James & Associates.

Mr. Brown said the Fed is still likely to leave its short-term interest-rate target unchanged at 5.25% when it meets later this month and will also probably keep the option of raising rates later. "While the housing slowdown is pretty serious, it's not enough to derail the overall expansion and labor markets remain tight," he said.

Earlier this week Fed Chairman Ben Bernanke said the weaker housing market will probably shave about one percentage point off U.S. economic growth in the second half of 2006 and continue to drag on growth next year. Mr. Bernanke said inflation risks remain but should moderate over time.

Average hourly earnings in September increased $0.04, or 0.2%, to $16.84. That was up 4% from a year earlier.

Last month's payrolls growth was well below Wall Street expectations, but the unemployment rate was also lower than expected. The median estimate of 23 economists polled by Dow Jones Newswires had projected a 125,000 payroll increase and a 4.7% unemployment rate. Wage growth was slightly less than expected, as surveyed economists had projected a 0.3% monthly increase in average hourly earnings.

Wachovia Corp. Economist Mark Vitner said the Labor report is consistent with a slowing economy, "but the unemployment rate is below what most economists would consider to be full employment."

Strained labor market capacity means that productivity -- output per hour worked -- is likely to suffer somewhat, Mr. Vitner said. The big upward revision to benchmark payrolls for this year could also detract from productivity, he said.

The Labor Department Friday said hiring last month in goods-producing industries fell by 11,000. Within this group, manufacturing firms cut 19,000 jobs, while construction firms added 8,000 jobs.

Service-sector employment grew by 62,000. Retail payrolls fell by 12,000. Business and professional services companies' payrolls rose by 12,000. Education and health services added 15,000 jobs. The average work week was unchanged at 33.8 hours.