Unemployment rate drops to 5.7 percent in August, with significant new hiring in the service sector

WASHINGTON (AP) _ The nation's unemployment rate unexpectedly fell to 5.7 percent in August and companies added 39,000 new jobs, the fourth consecutive monthly increase. <br><br>Last month's jobless

Friday, September 6th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ The nation's unemployment rate unexpectedly fell to 5.7 percent in August and companies added 39,000 new jobs, the fourth consecutive monthly increase.

Last month's jobless rate fell by 0.2 percentage point after remaining stuck at 5.9 percent for the two previous months. Analysts had expected the rate to stay at 5.9 percent or edge up slightly for August.

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.

``This report is showing the economy did better in August then most people previously thought,'' said Ken Mayland, president of ClearView Economics. ``First, we've got job growth. It's modest, but we got job growth.''

Also significant is that people looking for work last month didn't get discouraged and drop out of the job market, Mayland said. Many found jobs, helping to fuel the growth, he said.

But analysts are still predicting that the jobless rate will keep rising in the months ahead 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 the 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 rising 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.

In Friday's report, employment in the services industry surged by 100,000 in August, compared to an average monthly gain of 62,000 in the previous five months. Jobs in health care and temporary employment firms helped fuel the growth.

Government employment also was up by 41,000. Federal and local government hiring more than offset losses in state education. Employment in the federal government rose by 20,000 last month, with the Transportation Security Administration, which oversees the nation's security at airports, accounting for most of the increase.

Construction employment rose by 34,000 in August, reversing a loss of 30,000 jobs in July.

But factory jobs fell sharply in August by 68,000 after four months of losses that averaged just 18,000. The industry's losses were widespread. Retail employment also dropped by 55,000 last month despite a back-to-school shopping rush. Most of the cuts were in department stores