US employers laid off 216,000 workers last month, the smallest monthly job loss in a year, and a strong sign that the economy is in the process of stabilizing.
But the unemployment rate in August soared to 9.7 percent, the Department of Labor reported Friday. That's its highest level in (exactly!) 26 years, suggesting that it will be some time before all Americans who want to work can find a job.
"We're in that middle period, a kind of gray area," said John Canally, economist for LPL Financial in Boston. "Companies have stopped firing, but they haven't begun hiring yet." He says the economy should start adding jobs in the next few months.
Another positive sign: Average hourly earnings rose a respectable 0.3 percent while the average work week, which had been shrinking, stayed the same.
Although the August job-loss figure was smaller than many analysts had expected, the Labor Department revised upward the losses for June and July. Since the beginning of the recession at the end of 2007, the US has lost 6.9 million jobs – more than three times the job losses in the back-to-back recessions of the early 1980s. (The labor force was also smaller back then.)
The unemployment rate, which dropped unexpectedly in July, now looks to head upward again in coming months.
But because of the way the rate is calculated, this isn't quite as negative as it sounds, Mr. Canally said. August's increase was due in part to a 73,000 jump in the civilian labor force. In essence, as unemployed people become more confident about the economy, more of them start actively looking for work (where before they weren't counted as part of the labor force).
It usually takes several months for the economy to create enough jobs to employ them, which is why the unemployment rate typically lags a recovery.