If you want to use jquery ui autocomplete, your data must be “a simple Array of Strings, or it contains Objects for each item in the array, with either a label or value property or both”. This is from the documentation at http://jqueryui.com/demos/autocomplete/
Your server response does not follow the expected data type, you should modify suggest.php to post-process the data into label-value pairs.
As I understand it, you also want to perform a custom action when an item is selected from the autocomplete, so you should also add a handler for the ‘select’ event.