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Nation's Unemployment Rate Rises to 9.6 %

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While large portions of the East Coast breathed a sigh of relief as Hurricane Earl lost strength overnight, another storm, this one economic, was also less damaging than expected.

The government reports that employers cut fewer jobs than expected in August.  The nation’s payrolls shrunk by 54,000. 

This was not a great report but it was "better than many thought it would be,” wrote Joel Naroff, chief economist with Naroff Advisors in a note to clients.

Economists and analysts had expected job cuts of more than double that amount.

“In short, hardly great news but could have been much worse,” said Ian Shepherdson, Chief U.S. Economist with High Frequency Economics.

The Bureau of Labor Statistics also revised downwards the number of jobs lost in June and July as 123,000 fewer jobs were cut than first reported.

The unemployment rate rose to 9.6% from 9.5% in July. There are now 14.9 million people unemployed as more than 300,000 Americans restarted their job search last month.

As has been the case in previous months, a significant portion of the job losses came from the continued elimination of temporary Census 2010 workers. In August, government employment fell by 121,000, largely consisting of 114,000 Census jobs. At the peak in May, there were more than half a million temporary Census workers. That number has declined to just over 80,000.

Private employers last month hired 67,000 workers.

“The private sector continues to add new positions,” said Naroff.  “Unfortunately, companies are doing so at an extremely cautious pace.”

But today’s better than expected report will undoubtedly be held up by the administration as an evidence that the economy is recovering, albeit slowly. Critics have said claiming credit for fewer jobs lost than expected will not improve consumer confidence.

President Obama is expected to discuss the jobs report on Friday at the White House. Earlier this week, he said his administration is contemplating various proposals to stimulate the economy and push down the unemployment rate. The question will be whether or not any proposals can be approved and have an impact before the November midterm elections.

Closer Look at the Numbers

A broader measure of unemployment that includes people who worked part-time while seeking full-time jobs and those too discouraged to even look for work increased to 16.7 percent.

Those looking for work continue to be unemployed for extended periods of time, though that number has been slowly declining. Four out of ten out-of-work job seekers (42 percent) have been without work for more than six months.

In a positive sign, the number of temporary workers increased by 17,000 in August after cutting jobs in July, perhaps indicating that month was an aberration. Employers often bring on temporary workers before hiring full-time employees.

Another encouraging sign that private employers might start hiring again was the increase in average hourly earnings. Wages increased by 0.3 percent, more than the 0.1 percent economists had expected. Similar to temporary workers, employers often increase employee pay before deciding to hire new workers. 

The number of hours worked per week was basically unchanged. Employers often increase hours for current employees and pay overtime before hiring. As the increase was only 0.1 hours a week, companies may not be seeing enough business to warrant bringing on new employees.

Health care employment added 28,000 jobs in August. Throughout the recession, this sector has been consistently strong. For 2010, the health care industry has added 20,000 jobs on average each month. 

The manufacturing sector reversed course after several months of creating jobs, cutting employment by 27,000 jobs last month. 

In another surprise, construction employment increased by 19,000. As housing sales and commercial real estate projects have stalled, economists had not expected to see a jump in employment in this category.  The government report explained this number may have been helped after 10,000 workers on strike in July returned to work.

The next jobs report is scheduled to be released on October 6.