August jobs report: Signs of life for employment

NEW YORK (CNNMoney.com) -- Business hiring is picking up, but not enough to make up for the massive losses of temporary government jobs.

The economy lost a total of 54,000 jobs in August, the Labor Department reported Friday.

Businesses added 67,000 jobs to their payrolls in August. Economists had forecast a smaller gain of 44,000 jobs. It marked the eighth straight month that businesses added jobs, following nearly two straight years of job losses.

The bulk of the losses came from the public sector, as the government cut 114,000 temporary census workers. It was the third straight month that census worker layoffs caused an overall decline in jobs.

But the report showed some improvements in the jobs picture, a welcome piece of good news among a slew of disappointing economic readings in recent months.

"It is a sigh of relief," said Sung Won Sohn, economics professor at Cal State University Channel Islands. "The labor market in August was lethargic, but better than feared, reducing the fears of a double-dip recession."

The overall losses were less than expected. Economists surveyed by Briefing.com forecasted a loss of 120,000 jobs.

And upward revisions for June and July showed there were 123,000 additional job gains in those months than previously reported.

U.S. stocks posted strong gains following the pre-market report.

Government payrolls outside of the Census Bureau, however, trimmed another 7,000 jobs in the month, with cuts coming from cash-strapped state governments.

The unemployment rate rose to 9.6% in the month from 9.5% in July, matching economists' expectations.

President Obama said Friday the business hiring in the report is good news but "not nearly good enough."

"The economy is moving in a positive direction. Jobs are being created," he said. "They're just not being created as fast as they need to, given the big hole that we experienced."

He promised his administration would be unveiling additional legislation next week try to spur more hiring.

House Minority Leader John Boehner, R-Ohio, responded that the Obama administration policies are responsible for the weak jobs growth.

"We will not solve our fiscal challenges until we cut spending and have real economic growth -- and we won't have real economic growth if we keep raising taxes on small businesses," he said.

Not out of the woods yet: Stubbornly high levels of unemployment and weak job creation have raised fears that the nation's economic recovery is in danger of stalling out and falling into a double-dip recession.

Some economists cautioned that despite signs of life in the report, the labor market is still soft.

Scot Melland, CEO of Dice Holdings, a provider of specialized career web sites, said he thinks despite the improvement, the overall labor market deserves no better grade than a C+.

"It's moving in the right direction, but it's not the numbers we'd like to see," he said.

And few are forecasting any significant improvement through the rest of this year.

The pace of job growth among business is not enough to make a dent in the stubbornly high unemployment. About 150,000 jobs are needed every month just to keep up with the pace of population growth.

Even if job growth continues to improve, it will take years to recoup the net loss of 8.4 million jobs in 2008 and 2009. Even with more than 700,000 jobs added so far this year, total employment is 7.6 million jobs below where it stood at the start of the Great Recession.

"We see things going sideways to modestly up," said Tim Quinlan, economist with Wells Fargo Securities. "The layoffs are behind us but the hiring hasn't picked up yet.

September will likely see another large drop in government jobs. But with only 82,000 census workers left, there should be limited impact on employment from the census jobs in the final three months of the year.