A modest increase in June payrolls and an upturn in the unemployment rate announced by the government yesterday pointed to weaker US growth, but analysts warned the potential for overheating remained.

The Labour Department said the economy created 205,000 jobs in June, compared with 309,000 in May, and the unemployment rate edged up to 4.5 per cent from 4.3 per cent. Analysts said the low rise in wages should ease any lingering investor fears that the Federal Reserve might be tempted to tighten credit soon.