Analysts predicted that new jobs created would reach 225,000 and that the rate of unemployment would fall a little below the 6.2% level recorded in the past month.

An increasing number of people, with most of them in their prime working ages, have given up on their job search. The Labor Department reported that in total, the rate of unemployment fell at 6.1 percent in August. The slight improvement is attributed to the fact that most Americans were excluded in the labor force. They simply stopped looking for work.

The employment situation also explains why several ordinary Americans continue to be doubtful of a recovery.

The rate of labor force participation, which shows the share of working-age workers in the labor force, also dropped at 62.8% for the month of August as compared from July participation rate of 62.9%. The Labor Department announced that job creation during the months of June and July was lower than initially reported by a number of 28,000.

The unimpressive labor employment report could influence the Federal Reserve policymakers' decision to re-evaluate plans for increasing interest rates sooner than anticipated.

"The report is a remarkable disappointment as a headline number, especially after receiving such promising macro data over the summer," said Todd M. Schoenberger, President at the New York- based J. Streicher Asset Management.

The underemployment rate fell to 12 percent which is the lowest rate ever recorded since October 2008 when it was at 12.2 percent. This includes part time workers who are looking for a full time position and those who want to work but gave up looking for a new job.

The number of long-term unemployed or those who have been without a job for 27 weeks or more reached a total of 2.96 million which is the fewest compared to the situation back in January 2009 when it reached 2.7 million.

Private hiring in August reached 134,000 which is also one of the smallest gains this year. Employment in private offices increased by 112,000, while the payrolls in factories remain unchanged. Construction companies provided 20,000 new jobs while retail employment in August dropped by 8,400.

Policy makers at the Federal Reserve have been monitoring closely for improvement in the unemployment rate as well as the participation rate and growth in wages in order to make a better decision on when to start the process of gradually implementing short-term interest rates increase from near zero.

"A disappointing employment report for August gives U.S. policymakers more food for thought about when the economy might be capable of withstanding higher interest rates," said chief economist Chris Williamson at Markit, a research company. "The slowdown in hiring certainly vindicates the Fed's cautious approach to tightening policy."

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