U.S. Economy Creates 144,000 New Jobs

U.S. employers added 144,000 workers to their payrolls in August and hiring totals for the two prior months were revised up as the job market brightened, the Labor Department (search) reported on Friday.

The unemployment rate (search) dipped to 5.4 percent last month from 5.5 percent in July. But the drop in the jobless rate in August came as people left the work force for any number of reasons, the Labor Department said. Economists were predicting the jobless rate to hold steady in August.

The gain in payrolls was short of the 150,000 net jobs that economists were calling for. However, it represented the biggest jobs gain since May and marked the 12th month in a row that payrolls grew.

Job gains for July were revised up to 73,000, still a lackluster number but an improvement from the 32,000 advance first estimated. Payrolls for June also were revised up to show a larger gain than first reported.

The latest snapshot of the jobs climate comes just two months before the presidential election. President Bush, who hurried back to the campaign trail after accepting the Republican party's nomination for a second term Thursday, and his Democratic rival, John Kerry, joust frequently over the health of the economy and the availability of jobs.

The report created a slightly more favorable picture for summer job growth, but is likely to leave unresolved for now whether the economy was successfully shaking off a June soft patch as Federal Reserve (search) policymakers expect it to do.

In August retail and automobile sales came in sluggish, consumer confidence dropped and manufacturing activity grew at a slower pace.

The Fed, in a bid to keep inflation from becoming a problem, boosted short-term interest rates twice this year. That has left a key rate controlled by the Fed at 1.50 percent, still low by historical standards. The Fed's next meeting is Sept. 21. Some economists believe the Fed will push rates by another one-quarter percentage point at that time.

Economists want to see at least 200,000 net jobs added a month on a consistent basis before declaring the labor market fully healed.

The payrolls figure and the unemployment rate can sometimes go in different directions because they are derived from two separate statistical surveys.

The unemployment rate is calculated from a survey of around 60,000 households in which people are asked to state whether they have jobs or are looking for work. The unemployment rate in August fell as the labor force shrank by 152,000 from the previous month.

The survey used to calculate the payroll figure -- seen as a better barometer of the labor market's health by many economist -- is based on information from about 160,000 businesses and government agencies, covering roughly 400,000 individual work sites.

Reuters and the Associated Press contributed to this report.