NEW YORK (CNN/Money) – Job growth rebounded in the United States last month and the unemployment rate dropped unexpectedly, the government reported Friday, in one of the last big employment reports before the November election.
The Labor Department said the economy created 144,000 jobs in August, the strongest reading since May and up from a revised 73,000 jobs in July. Economists surveyed by Briefing.com had forecast 150,000 new jobs.
The unemployment rate dipped to 5.4 from 5.5 percent in July, mainly due to a decline in the labor force, bringing the rate to its lowest since September 2001.
The job report, closely watched each month, is especially important to President Bush and Democratic challenger John Kerry since it comes just two months before the Nov. 2 election. There is only one more job report due before election day, the September report due Oct. 8, the morning of the second presidential debate.
The report could give a lift to the Bush campaign, coming just hours after the Republicans renominated him. The president and his advisers like to point to the nearly 1.7 million jobs created since August 2003.
But the Kerry campaign notes that despite the recent job gains, the economy has still lost about 1 million jobs since Bush took office in early 2001, meaning Bush is likely to become the first president since the Depression era’s Herbert Hoover to complete his term with an overall drop in U.S. payrolls.
Roger Altman, senior economic advisor to Kerry, told CNNfn that even with the most recent gain, the administration’s job performance has been weak.
“You need about 150,000 new jobs a month to keep even with growth in population,” he said. “Taken in proper context, it’s just not a very good record.”
Republican Sen. Charles Grassley said that the latest jobs report is proof that the economy is performing well now.
“There have been very few years in my lifetime that we’ve had an unemployment rate as low as this,” he told CNNfn.
Last month’s job growth was the strongest since 208,000 in May, and the department also revised upward its readings for June and July. June job growth was revised to a gain of 96,000 jobs from an earlier reading of 78,000, while July was revised from an earlier reading of 32,000.
“The jump in payrolls this month shows that although the economy clearly went through a wider-than-expected soft patch, it does not appear as though the shortfall in growth was permanent,” said Anthony Chan, senior economist with J.P. Morgan Fleming Asset Management.
“It now looks as though the economy is continuing to gravitate towards a more gradual pace of economic growth.”
The report showed less strength in the labor market than in the spring, when the economy created an average of nearly 300,000 jobs a month from March through May.
But after two months of weak reports, the latest number and the revisions to June and July brought the three-month average to just over 100,000.
In its report, the department said manufacturing and construction showed gains and the service sector added 108,000 jobs. Education and heath services posted a seasonally adjusted 45,000 gain, and the government added 24,000 jobs.
Average hourly wages rose 5 cents to $15.77. Over the last 12 months average hourly wages have risen 2.3 percent, not keeping pace with the rate of inflation.
“The report is still a poor one given what has come before, but not terrible,” economist Robert Brusca of FAO Economics wrote in a note after the report. “There is no reason to think it is weak enough to put the Fed on hold.” But Brusca said a rate hike at that meeting would be a mistake, given the economy’s mediocre strength.
The Federal Reserve, the nation’s central bank, is now all but certain to raise a key short-term interest rate when its policy-makers meet later this month, in a bid to ward off inflation. Another weak jobs report could have put the Fed on hold in September.
“Taken together, all this employment data provides the Federal Reserve with a measure of confidence to allow an increase in the funds rate,” said Wachovia Securities Chief Economist John Silvia in his note on the report.
While some economists said the jobs report show the recovery is back on track, others said not so fast.
“The outlook remains poor,” said University of Maryland Business School professor Peter Morici. “Production cutbacks at Ford and GM, mediocre personal income growth and record trade deficits all bode poorly for economic growth and jobs creation.”
On Wall Street, Treasury bond prices slumped after the report, sending bond market yields higher, as investors bet the Fed would go ahead and raise its short-term rate target a quarter percentage point on Sept. 21.
Stock prices were mixed, with tech stocks tumbling after a weak revenue forecast from Intel Corp. (INTC: Research, Estimates), the biggest chip manufacturer. Blue- chip stocks were little changed