Despite hiring, US unemployment rate seems frozen

Unemployment is stuck at high levels even though some companies are hiring. The problem, government data show, is that too few jobs are being created for the growing number of people looking for work.

Private employers added a net total of 67,000 jobs in August. But the unemployment rate rose to 9.6 percent from 9.5 percent, the Labor Department said Friday, because the number of job-seekers overwhelmed the number of openings.

The unemployment rate has exceeded 9 percent for 16 straight months and is all but sure to extend that streak into next year. If it does, it would break a record of 19 straight months above 9 percent, set from 1982-83, after a severe recession.

Nearly 15 million people are unemployed this Labor Day weekend, and the sluggish economy is putting pressure on President Barack Obama and the Democrats ahead of the November midterm elections. Obama said Friday that he intends to unveil a new package of proposals that will likely include tax cuts and spending to spark job growth.

On top of the jobs that companies created last month, both July and June's private-sector job figures were upwardly revised. Overall, the economy lost 54,000 jobs last month as 114,000 temporary census positions ended.

The Labor Department report hardly suggests the economy is out of danger, but the figures were not as bleak as some economists had predicted.

Wall Street embraced the news, and stocks surged within seconds of its release. The Dow Jones industrial average closed up 127 points.

"When the bar is low, it isn't hard to exceed it," said Diane Swonk, an economist at Mesirow Financial. The report "alleviates the sense that the economy is falling off a cliff."

Even with August's gains, job growth has weakened in recent months and isn't enough to keep the unemployment rate from rising. Private employers have added only 78,000 jobs per month, on average, in the past three months. It would take at least 200,000 jobs a month to keep up with population growth and rehire millions of unemployed Americans.

Many economists don't expect that pace of job growth until next year. As a result, the unemployment rate could exceed 9 percent for many more months.

The November midterm elections are already shaping up to be a referendum on Democrats' handling of the economy. Many expect the majority party to lose many seats and possibly control of the House and Senate.

Obama called the latest employment figures positive news but acknowledged that much more job creation is needed to help restore the 8.4 million jobs lost during the downturn.

"It reflects the steps we've already taken to break the back of this recession," Obama said. "But it's not nearly good enough."

The president urged Congress to extend the Bush administration's tax cuts only for middle-class Americans and to pass a bill that would increase lending and reduce taxes for small businesses.

Republicans in Congress want to extend the tax cuts for all Americans, including the wealthy. That's a position more rank-and-file Democrats are beginning to embrace because the economy has not improved fast enough.

There were 14.9 million unemployed Americans last month, the department said. But including people working part-time who would prefer full-time work and those who have given up looking for jobs, 26.2 million people were "underemployed." The underemployment rate rose from 16.5 percent in July to 16.7 percent in August.

Persistently high unemployment and a growing economy are not necessarily incompatible, economists said.

Average hourly earnings rose last month. That extra income is likely to help sustain the recovery, said Neil Dutta, an economist at Bank of America-Merrill Lynch. But it could also produce a "two-tiered" work force, where millions are still jobless but those working see their incomes rise, he said.

Still, Sadie Simpson, a 30-year old marketing manager in San Francisco, did notice an uptick in job postings this summer. She was laid off in January from her full-time job as a real estate marketing manager in Washington D.C.

She couldn't find similar jobs, so moved to the West Coast to search for better opportunities. Her sister, who has worked in the wine industry for 20 years, helped Simpson land an interview, and she started her job this month as marketing manager, promoting pinot grigio rather than luxury condos.

"The only way to get a job these days, it's who you know and how you can get in the door," she said.

After dropping for several months, the work force grew by more than a half-million people, the Labor Department said. Those out of work are not counted among the unemployed unless they are searching for work.

The fact that more out-of-work people resumed their job searches in August reflected desperation more than it did confidence in the job market, economists said. Many of those who entered the labor force last month were 45 and older, said Sophia Koropeckyj, an economist Moody's Analytics.

They are likely resuming their job searches as their savings are depleted, she said.

When companies have open positions to fill, the demand is high. Kia Motor Manufacturing had about 600 open jobs earlier this year as it moved production of a sport utility vehicle to Georgia from a Hyundai plant in Alabama. The company got more than 44,000 applications by May, when the hiring window closed, said company spokeswoman Corinne Hodges.

But many companies are nervous about expanding as long as the economy looks so weak.

Carpet Barn Carpet One Floor & Home, which sells carpet, wood floors and window treatments, expanded with a new location in Hyannis, Mass., last month but is keeping a lid on hiring and expenses.

The 39-year-old, family-run business is bringing back two workers it laid off last year and has hired one part-time employee to help out. But it's holding off on adding more workers until the economy picks up.

"The key is to keep your operating expenses low," said Linda Alferes Martinho, who owns the business with her sister and brother.

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Associated Press writers Erica Werner in Washington, Christopher Leonard in St. Louis and Anne D'Innocenzio in New York contributed to this report.