U.S. employment fell for a third straight month in August, but the drop was far less than expected and private hiring surprised on the upside, easing pressure on the Federal Reserve to prop up economic growth.

Nonfarm payrolls declined 54,000, the Labor Department said Friday, helping to assuage fears of a double-dip recession in financial markets that had looked for a drop of 100,000 jobs.

However, the data will likely do little to take the political heat off President Barack over his handling of the economy or improve the Democratic Party's chances in November's mid-term congressional elections.

"It is inconsistent with fears that a sharp slowdown in the economy is under way.

This report, together with other recent data, will convince the Fed to refrain from launching a new asset purchase program at this month's meeting," said Dean Maki, chief U.S. economist at Barclays Capital in New York.

The fall in payrolls last month was largely a result of 114,000 temporary census workers being laid off.

Private employment, considered a better gauge of labor market health, increased 67,000 after a revised 107,000 gain in July. Markets had expected a rise of only 41,000 in August. In addition, the government revised payrolls for June and July to show 123,000 fewer jobs lost than previously reported.

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