Hiring revival pulls down jobless rate

WASHINGTON -- A hiring revival pulled the nation's unemployment rate down to 4.7 percent in August and flashed a Labor Day weekend message that the slowing economy isn't in danger of fizzling out.

The latest snapshot, released by the Labor Department on Friday, was a bit brighter than expected and eased some fears that the economy -- weighed down by a housing slump -- might tip into recession.

"This provides some peace of mind," said Oscar Gonzalez, economist at John Hancock Financial Services.

Employers boosted payrolls by 128,000 in August, an improvement over the 121,000 jobs created in July. Schools, hospitals, financial firms, computer-design shops and construction companies were among those posting employment gains last month. That helped to blunt job cuts in manufacturing, retailing, trucking and elsewhere.

On Wall Street, the employment news lifted stocks. The Dow Jones industrials gained 83 points to close at 11,464.15.

With hiring improving, the unemployment rate dropped down a notch from a five-month high of 4.8 percent in July. That decline put the current unemployment rate close to a five-year low of 4.6 percent reached in May and maintained in June.

The jobless rates for blacks in August dipped to 8.8 percent, the lowest since July 2001. The unemployment rate for Hispanics held steady at 5.3 percent.

Construction spending plunged in July by the largest margin in nearly five years, the Commerce Department reported, another sign of the cool down in the once sizzling housing market.

A report from the Institute for Supply Management, meanwhile, showed manufacturing activity in August expanding at a slower -- but still decent -- clip than in July. That's consistent with the moderate growth seen in the overall economy.

The latest batch of economic news comes as the nation's work force gets ready to celebrate the Labor Day holiday and as the election season looms.

Economic conditions are likely to be on voters' minds when they go to the polls in November.

"The economy is a top concern for many voters in America, although there are other salient issues like the war in Iraq and terrorism," said Costas Panagopoulos, a political science professor at Fordham University. How people vote is shaped by how they are faring economically.

The Bush administration, whose officials blasted the airwaves Friday to tout the president's economic policies, contends Americans are doing better. Rival Democrats say many are struggling.

"We enter this Labor Day holiday with .... a strong economy that is producing steady, consistent gains for America's workers," said Labor Secretary Elaine Chao.

Countered House Democratic Leader Nancy Pelosi of California: "President Bush and Republicans are out of touch with Americans who are living paycheck to paycheck and struggling to make ends meet."

Workers' average hourly earnings edged up to $16.79 in August, a tiny 0.1 percent increase from July.

Over the 12 months ending August, though, wages grew by 3.9 percent. The last time this figure was higher was in June 2001. Yet, many workers' paychecks are barely keeping up with inflation, economists said.

The job hunt grew longer.

The average time that the 7.1 million unemployed spent searching for work in August was 17.4 weeks. That was the longest duration since February's 17.6 weeks.

Given the slowdown in the national economy and in the housing market, the Federal Reserve on Aug. 8 halted a string of interest rate increases that lasted more than two years.

Economists have mixed opinions about the Fed's next move on Sept. 20. Many believe the central bank will leave rates alone again and said the employment report would justify such a decision. Others predict another rate increase could be in store at that meeting or later this year to keep inflation in check.

The tally of new jobs last month was slightly stronger than the 125,000 that economists were forecasting. Payroll gains for June and July also turned out to be stronger, with the economy adding 18,000 more jobs in those two months combined than previously estimated.

Michael Moskow, president of the Federal Reserve Bank of Chicago, in a recent speech, said trends in both the growth of the population and labor force participation point to slower monthly job gains that is still consistent with healthy economic activity.

Earlier in the decade, most economists estimated that monthly job growth of about 150,000 was consistent with the economy growing close to its potential. Now research suggests monthly increases of roughly 100,000 jobs are probably in line with the economy moving ahead at about its potential, Moskow said.

Against that backdrop, the new employment report suggests "Goldilocks may be coming. The economy is not too hot nor too cold," observed Carl Tannenbaum, chief economist at LaSalle Bank.