Growth in jobs last month was not fast enough to prevent the unemployment rate from ticking up to 9.6 percent from 9.5 percent, the Labor Department reported Friday morning.
Businesses added another 67,000 jobs in areas from health care to business services, but that was overwhelmed by 121,000 layoffs by governments around the country, including 114,000 temporary workers let go by the Census Bureau.
The comings and goings at census have particularly distorted the jobs picture in recent months, depressing overall employment by 54,000 in August. Earlier this year, they inflated the job gains to over 400,000 in one month.
Stocks surged after the report's release but then fell back, the Associated Press reported. The Dow Jones industrial average rose 64 points in morning trading and broader indexes were all up.
A look at private job gains, which have been less volatile, reveals steady gains that have brought the total of new jobs to 763,000 since December, the department said. Also, revisions show that private employment rose by 66,000 more in June and July than previously reported.
"Growth continues, even though it's less than many people expected," said John Silvia, chief economist at Wells Fargo Securities. He noted that several large sectors -- education, health, businesses services and leisure -- have consistently added jobs this year despite the ups and downs of employment in other areas like census-taking.
A rise in the workweek of manufacturing and non-supervisory employees also suggests that growth in the economy continued at a "moderate" pace last month, he said, despite fears of a double-dip recession.
President Obama hailed the steady growth in private jobs, and said he plans to present legislation next week that would try to accelerate the job growth, particularly among small businesses, which are the main engine of job growth in the United States.
"That's positive news," he said in a Rose Garden news conference with his economic aides by his side. "Jobs are being created. They're just not being created as fast as we need. . .We just have to speed it up."
Mr. Obama cast blame on Senate Republicans who last month held up a small business lending bill which he said is needed to help businesses get the loans they need to create jobs.
"We have a responsibility to lift up our small businesses," he said. "Passing a small business jobs bill should be the first priority of business" when Congress gets back to work next week, he said.
But Republicans blamed Mr. Obama's economic policies for the sluggish job growth, including a slew of regulations on health care, Wall Street and other areas that have made it more difficult for businesses to raise money and hire workers.
"It is time for him to change course, abandon his job-killing policies and find himself a new economic team," said House Republican Leader John Boehner of Ohio.
The jobs report showed that manufacturing hours rose, but jobs at factories fell by 27,000 due to a change in the summer layoff schedule for Detroit automakers which retool their plants at this time of year to produce next year's car models.
In a positive sign, construction jobs rose by 19,000 after months of decline, reflecting the return of some 10,000 striking workers, the department said.
The rise in the unemployment rate was the result both of government layoffs and the failure of private employers to create jobs at a faster pace. Economists estimate that normally about 150,000 jobs must be generated each month to keep the unemployment rate from rising. Unemployment topped out at over 10 percent last fall.
Also pushing up the unemployment rate, 550,000 workers surged into the labor force during August, but not all were able to find jobs. The number of people working part-time because they could not find full-time jobs rose by 331,000 to 8.9 million, the department estimated.
"The labor market is stuck in positive, but sub-par employment growth," said Heidi Shierholz, economist at the Economic Policy Institute. She noted that growth in private jobs, while consistent all year, decelerated last month from the 99,000--a-month pace set in the first half of the year.
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