While the weaker-than-expected jobs report doesn't signal a retrenchment in the economy, it's hardly a ringing endorsement of it, and Federal Reserve officials will be taking note. The pace of employment and wage growth was subdued enough in June that one money manager declared the death of inflation, at least for now. After three months of strong job growth, nonfarm payrolls increased just 112,000 in June, less than half the 250,000 consensus. Payrolls for both April and May were revised down, and the unemployment rate held steady at 5.6%. "It was a soft number," said Gary Thayer, chief economist at A.G. Edwards. "We're still not out of the woods yet on the labor markets." The details of the report were dramatic. Only 57% of 278 industries added jobs in June, the lowest since February and down from 64.6% in May. The average workweek fell by two-tenths of an hour to 33.6 hours, and the average manufacturing workweek fell by three-tenths to 40.8 hours. Total hours worked declined by 0.6%. "We still have plenty of slack in the labor market, and these figures show job growth being well below the natural increase in the workforce," said Bill Cheney, chief economist at MFC Global Investment Management. Many economists believe that the labor market is key to sustainable economic growth. The more jobs created, the more money consumers have to spend, and consumer spending accounts for two-thirds of economic growth. "While I remain positive overall about the state of the economy, this report paints a distinctly weaker picture than we've seen over the past few months and was decidedly weaker than we expected," Cheney said. The data throw into question just how many more rate hikes the market is likely to see this year. The Fed raised short-term interest rates by 25 basis points on Wednesday but repeated its claim to raise rates "at a pace that is likely to be measured." Before Friday's report, investors had been braced for a series of rate hikes and a funds rate of 2.25% by year-end.