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: Unemployment Rate Jumps To 26-Year High Of 9.7%
09/04/09 09:18 am (EST)

(RTTNews) - Employment fell by less than expected in the month of August, according to a report released by the Labor Department on Friday, although the report also showed a much bigger than expected increase by the unemployment rate.

The report showed that non-farm payroll employment fell by 216,000 jobs in August following a revised decrease of 276,000 jobs in July. Economists had expected a loss of about 230,000 jobs compared to the loss of 247,000 jobs originally reported for the previous month.

While job losses continued in many of the major industry sectors, the Labor Department noted that the declines have moderated in recent months.

Despite the slower pace of job losses, the Labor Department also said that the unemployment rate jumped to 9.7 percent in August from 9.4 percent in July. With the increase, which exceeded economist estimates, the unemployment rate rose to a new 26-year high.

Chris Low, chief economist for FTN Financial, noted, "The unemployment rate is a lagging indicator which is likely to continue to rise for a few months even after payroll growth resumes."

The continued drop in employment in August reflected job losses in both the goods-producing and the service-providing sectors, which lost 136,000 jobs and 80,000 jobs, respectively.

However, the decrease in jobs in the service-providing sector was partly offset by an increase of 52,000 education and health services jobs.

"Job losses continued in August, but with the economy starting to gather momentum, the losses were the smallest since last August," Low said. "Jobs will recover soon, as long as the economy does not suffer a relapse."

The report also showed that average hourly earnings increased by $0.06 or 0.3 percent in August to $18.65. With the monthly increase, average hourly earnings were up 2.6 percent year-over-year.

While the employment data is a lagging indicator of the strength of the economy, the jump in the unemployment rate could still have a negative impact on consumer confidence, which in turn could lead to a reduction in consumer spending.