Jobless rate down, but experts say it won't last

By Leigh Strope

Associated Press

WASHINGTON -- The nation's unemployment rate unexpectedly improved to 5.7 percent in August, and companies added 39,000 new jobs for the fourth consecutive month.

Last month's jobless rate fell by 0.2 percentage point after remaining stuck at 5.9 percent for the two previous months. The government's figures are adjusted for expected seasonal changes.

Hiring increased in the construction industry, government and the service sector last month, but those gains were largely offset by employment cuts in manufacturing and retail. The creation of 39,000 new jobs was in line with what economists expected.


Analysts are still predicting that the jobless rate will keep increasing in the months ahead, however, because future job growth won't be strong enough to support significant and sustained drops in the overall rate.

That rate has bounced in both directions in recent months and "has shown no clear trend," said Kathleen Utgoff, commissioner of the Bureau of Labor Statistics.

Continuing layoffs, as evidenced by three straight weeks of increasing claims for unemployment benefits, also are raising concerns about the health of the job market, economists said.

Businesses, still facing economic uncertainties, have been wary of making big commitments in hiring and in capital spending, two factors restraining the economy's recovery.

The Federal Reserve, hoping to quicken the pace of the recovery, has kept short-term interest rates at four-decade lows all year.

It also has signaled it is willing to move rates lower if economic conditions warrant.

The shape of the recovery ultimately will be determined by consumers and the willingness or reluctance of businesses to spend and invest in the months ahead.

So far, the stagnant job market, eroding consumer confidence and turbulent stock market haven't caused consumers -- the economy's lifeblood -- to dramatically trim spending.


That's because those potentially negative factors have been offset by positive ones, including increasing home values, low interest rates and a refinancing boom that has left people with extra cash.

Most analysts don't foresee the economy sliding back into a feared "double dip" recession, but the struggle to recovery poses a challenge for President Bush and will be a key topic for voters heading into the November elections.

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