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BLS Jobs Report: Unemployment Rate Falls, But Obama Should Still Be Worried

The U.S. economy added just 96,000 jobs in August, and the unemployment rate ticked down from 8.3% to 8.1% according to data from the Bureau of Labor Statistics. The unemployment rate fell, but only because more people gave up looking for work.

The August job number was less than the estimate of 125,000 new jobs. The Labor Department also says 41,000 fewer jobs were created in July and June than first estimated. The economy has added just 139,000 jobs a month since the beginning of the year, below 2011's average of 153,000.

Friday's report was the 30th straight month of private-sector job gains, a point Obama and his allies are certain to spotlight.

The Labor Department reported that weekly unemployment claims were at 365,000, down from 377,000 the previous week and that initial unemployment claims data in the first part of August dipped from July levels. A drop in initial unemployment claims indicates that companies are laying off fewer workers and hiring more people, resulting in bigger net job gains.  

Gallup said Thursday that by its measure, the nation’s seasonally unadjusted unemployment rate dipped to 8.1% for August, down from 8.3% measured in mid-August and 8.2% for the month of July. Gallup's seasonally adjusted jobless rate for August is also 8.1%, but that is a slight uptick from 8% at the end of July.

August’s job numbers were significantly less than expected and well below the 200,000 required to keep the unemployment rate going down and keep pace with or exceed normal workforce growth.

The unemployment rate has been above 8% for 43 consecutive months and the average length of joblessness for those who remain in the labor force is nearly 39 weeks.

The Rasmussen Employment Index fell nine points in August to 72.0, the lowest level of confidence since October 2011. Worker confidence in the labor market is now roughly the same as it was in the month following the Wall Street meltdown in the fall of 2008.

The report comes right before next week’s meeting of Federal Reserve policy makers. The jobs number could provoke the Fed to further push down already low interest rates to pump up the economy. Federal Reserve Chairman Ben S. Bernanke said last week that economic growth is far from satisfactory and vowed that unless things improve, the Fed would be “forceful” in taking action to stimulate more robust growth. 

Two independent national reports were released that were in sharp contrast to the bureau labor report. The ADP National Employment Reportestimated that companies added 201,000 jobs last month, the most since March. Employment in the private, service-providing sector expanded 185,000 in August, up from 156,000 in July. Employment in the private, goods-producing sector added 16,000 jobs in August. Manufacturing employment rose 3,000, following an increase of 6,000 in July. The ADP National Employment Report, sponsored by ADP, a payroll provider, is a measure of employment derived from an anonymous subset of roughly 500,000 U.S. business clients.

The Institute for Supply Management, a trade group of purchasing managers, said its services index rose to 53.7 from 52.6 in July. Any reading above 50 indicates expansion. Economic activity in the non-manufacturing sector grew in August for the 32nd consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business Service businesses such as stores, hotels and financial companies reported sharp hiring gains.

The highly anticipated and bleak jobs report comes out right on the heels of the Democratic Convention. The dismal forecast is likely to negate any forward momentum Obama may have received from the convention.

There are only 2 jobs reports left before the November election. The biggest threat to Obama over the next two months would be a rise in the unemployment rate, the most visible economic statistic for most voters. A drop in unemployment would enable Obama to focus on social issues that might play better with the independent voters he needs in battleground states.

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