Sept. 5 (Bloomberg) -- The U.S. economy unexpectedly lost 93,000 jobs in August, the most since March, and the unemployment rate fell to 6.1 percent as more discouraged workers dropped out of the labor force, government figures showed.

Payrolls fell after a revised 49,000 drop in July, the Labor Department said in Washington. The jobless rate fell from 6.2 percent in July and 6.4 percent in June, the highest since 1994.

The August declines hit service industries as well as manufacturers, who have now shed jobs for 37 straight months, and extend the number of positions lost since President George W. Bush took office to 2.7 million. Companies including Dow Chemical Co. and computer maker Gateway Inc. are among those firing workers to save costs as U.S. productivity rises.

``This is a job-`loss' recovery'' from the recession that ended in November 2001, Federal Reserve Governor Ben Bernanke told a Bloomberg News economics forum yesterday. Compared with the so- called jobless recovery after 1991, ``it's a much bigger episode in terms of lost jobs and offsetting productivity gains.''

Just 10 of the 64 economists surveyed by Bloomberg News expected a decrease in August employment. Credit Agricole economist Vincent Lahuec's forecast for a decline of 30,000 was the lowest in the survey. Payrolls were forecast to rise by 20,000 after a previously reported decrease of 44,000 in July, according to the median estimate.

The Treasury's 4 1/4 percent note maturing in 2013 rose 3/4 point, pushing down the yield 10 basis points to 4.40 percent at 9:07 a.m. New York time.

Manufacturing

The U.S. has now lost 1.4 million jobs since the economy emerged from the latest recession in November 2001.

Bernanke and other panelists said the U.S. needs to start adding jobs to help sustain consumer spending that's been the backbone of the recovery. Bush last week said he would create a new assistant secretary position in the Commerce Department to try to revive the manufacturing sector.

The Fed governor held out the possibility that central bankers may reduce interest rates from an almost 46-year low if the job market continues to lag and inflation slows further, hurting companies' pricing ability.

Manufacturers shed 44,000 jobs, starting a fourth year of monthly declines, today's Labor Department report showed. The factory workweek was unchanged at 40.1 hours while overtime rose by 0.1 hours to 4.1 hours.

``The manufacturing sector has been in decline for the last 40 years,'' Labor Secretary Elaine Chao said in a Bloomberg News television interview. ``Having said that, we are very concerned. We are focusing a lot of attention on manufacturing.''

Overseas Competition

Manufacturers including Caterpillar Inc., the world's biggest maker of earth-moving equipment, say they're being forced to move some production overseas to compete with lower-cost rivals and imports. Tax benefits in the company's Illinois home state are being eroded by budget deficits, Caterpillar's chief executive officer said.

``You've got to be sure you're producing product in a low cost country so that you can compete against the other people who have free access to the North American market,'' CEO Glen Barton said. ``You've got to be using the same cost base, the same supplier base, the same technology base, and that's why it's very important to us to do something in China, frankly.''

The civilian labor force fell by 10,000 workers from July. The report identified 503,000 discouraged workers last month, compared with 378,000 in August 2002.

Today's report is ``a big disappointment,'' said Chris Low, chief economist at FTN Financial in a radio interview with Bloomberg News. ``You've got enough momentum in the economy to add jobs but not enough confidence among businesses to hire.''

Services

The household survey, which is used to calculate the unemployment rate and is derived from a separate telephone survey of 60,000 homes, showed a 147,000 increase in employment. Some economists say rising employment in the household survey is a leading indicator of the strength of the labor market.

Employment in service-producing industries, a category that includes banks, temporary-help services and government agencies, declined by 67,000. Employment at the temporary-help agencies rose 6,800. Retail employment fell by 3,800.

Government employment fell by 26,000 in August as some states saddled with budget deficits fire workers to cut costs.

Average weekly hours worked for all employees was unchanged at 33.6 hours, in line with the forecast. The blackout in the Northeast and Midwest caused some manufacturers to shut down production until electricity returned.

Incomes increased last month. Workers' average hourly earnings rose by 2 cents to $15.45.

The U.S. economy grew at a 3.1 percent annual rate in the second quarter, more than double the rate in the first three months of the year and the fastest since last year's third quarter.

Economic Growth

Second-quarter growth was helped by consumer purchases, the biggest defense spending increase since 1951 and corporate investment in new equipment.

``You're going to need to add something like 200,000 jobs to bring down the unemployment rate significantly,'' said Ken Mayland, president of Clear View Economics LLC in Pepper Pike, Ohio. That would take sustained growth of at least 3.5 percent, said Mayland. He said he expects ``meaningful'' growth in employment by yearend.

Gross domestic product may rise at a 3.6 percent rate this quarter and 3.7 percent in the final three months of 2003, according to the median of 55 economists surveyed from July 31 to Aug. 7.

Economic reports in the past week have added evidence that the economy is gaining momentum.

Recent Statistics

Chicago-area manufacturing expanded in August for the fourth month in a row as new orders accelerated and factory employment rose for the first time in almost 2 1/2 years, the National Association of Purchasing Management-Chicago said. The Institute for Supply Management said earlier this week that U.S. manufacturing grew in August at the strongest pace in eighth months.

Many companies are planning further job cuts to boost profit, as excess production capacity makes it difficult to raise prices in many industries. Efficiency gains have allowed companies to produce the same amount with fewer workers, and some economists said it will take growth of at least 3.5 percent to reduce unemployment.

U.S. worker productivity expanded at a 6.8 percent rate in the second quarter, triple the pace of the first, a government report showed.

Job Cuts

Dow Chemical Co., the largest U.S. chemical maker, said that as of the end of July it had eliminated 2,300 of the 4,000 jobs it planned to cut to save $400 million this year.

Gateway Inc., a Poway, California-based personal-computer maker that has lost money in 10 of the past 11 quarters, will cut at least 5.3 percent of its workforce by hiring other companies to produce and assemble PCs.

The lack of job creation may be weighing on consumers. Last week, a University of Michigan survey showed that U.S. consumer confidence fell more than expected in August amid worries about the lack of jobs and higher fuel prices.

Among blacks, the unemployment rate fell to 10.9 percent from 11.1 percent in July. The jobless rate for Hispanics fell to 7.8 percent from 8.2 percent, while the rate for whites fell to 5.4 percent from 5.5 percent.

For teenagers, unemployment fell to 16.6 percent from 18.4 percent. The jobless rate for women held steady at 5.2 percent while the rate for men fell to 5.8 percent from 5.9 percent.

Last Updated: September 5, 2003 10:40 EDT