NATION

Unemployment rate drops to 8.1 percent, 96,000 jobs added in August

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WASHINGTON (AP) - U.S. employers added 96,000 jobs in August, a tepid figure that points to the economy's persistent weakness and slowing prospects for the unemployed.

The unemployment rate fell to 8.1 percent from 8.3 percent in July. But that was only because more people gave up looking for jobs.

eople out of work are counted as unemployed only if they're looking for a job. The sluggish job growth could slow the momentum President Barack Obama hoped to gain from his speech Thursday night to the Democratic National Convention.

It could also make the Federal Reserve more likely to unveil a new bond-buying program at its meeting next week.

The goal would be to lower long-term interest rates to encourage borrowing and spending.

Hourly pay fell in August, manufacturers cut the most jobs in two years and the number of people in the work force dropped to its lowest level in 31 years.

The government also said 41,000 fewer jobs were created in July and June than first estimated.

FED LIKELY TO ACT

Will the Federal Reserve go big next week? Most economists say they expect the Fed to announce action to try to stimulate the economy.

And many now think the Fed will make the boldest move it can - a third round of bond buying to try to lower long-term interest rates.

This is known as quantitative easing.

"If there was any lingering doubt within the Fed about announcing a new round of quantitative easing next week, this should surely push them over the edge," said Tom Porcelli, an economist at RBC.

Nigel Gault, chief U.S. economist at IHS Global Insight, thinks the Fed will focus any new purchases on mortgage-backed securities to try to lower mortgage rates and boost the fledgling housing recovery.

SHRINKING WORK FORCE

The unemployment rate declined in August, but for a bad reason: The government doesn't count people as unemployed if they've stopped looking for a job.

The number of people working or looking for work shrank in August by 368,000, the government said.

The reasons vary, economists say. Many people, after months of looking for a job without success, give up.

But this group of "discouraged" workers doesn't fully capture the phenomenon.

New parents, for example, may quit a job to focus on raising children. An older worker who's laid off may claim Social Security benefits instead of looking for a new job.

And there's also a demographic shift underlying the trend: Baby boomers are retiring.

The result is that the percentage of working-age Americans with a job or looking for one has dropped to 63.5 percent, a 31-year low.

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