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Job growth hits late-summer lull

The U.S. labor market slumped in August, surprising experts who had expected another month of steady job-creation.

Employers added only 142,000 jobs last month, the U.S Labor Department said Friday, undershooting forecasts of 230,000 and the smallest gain this year. Job growth was also less vigorous in June and July, with the agency revising down its initial estimates for those months by a net total of 28,000.

The nation's unemployment rate dipped to 6.1 percent, from 6.2 percent, as fewer people looked for work.

Job growth plunged early this year as harsh winter weather slowed economic activity to a crawl. But the economy has picked up speed since then, with gross domestic product shooting up to an annualized rate of 4.2 percent between April and June. Factors propelling growth included stronger manufacturing activity, increased construction spending, solid retail sales and healthy business investment in equipment.

"The tone of the recent U.S. economic reports has been near universally positive, pointing to a sustained pickup in underlying growth momentum," Millan Mulraine, an analyst with TD Securities, said in a research note ahead of the latest job numbers.

Until August, employers had added more than 200,000 jobs per month for six straight months, a level that economists say is sufficient to steadily chip away at unemployment. Payroll gains have averaged 215,00 per month this year, compared with 194,000 in 2013.

In another positive sign for the labor market, small businesses have recently shown a greater willingness to hire as their confidence in the economy grows. Business surveys also suggest smaller firms are having a hard time finding workers, a sign that long-stagnant wages may finally be set to rise as employers compete for qualified employees, notes Ian Shepherdson, an economist with Pantheon Macroeconomics.

Unemployment, which topped 10 percent during the recession that followed the 2008 financial crisis -- and which remained as high as 7 percent as of November -- has steadily ticked down. Forecasters expect the economy to expand at at annualized rate of at least 3 percent through the end of the year.

With most signals pointing to the economy moving forward, some forecasters downplayed last month's decline in job growth, noting that August employment data have tended in recent years to understate the strength of the labor market.

"We're not too concerned by what is probably just an isolated blip," said Paul Ashworth, chief U.S. economist with Capital Economics. "Other indicators suggest that labor market conditions are still strengthening, and the latest round of survey evidence indicates that economic activity is soaring."

Yet even that faster pace of growth in recent months is far weaker than normal following a recession. The August plunge in job-creation underlines the halting nature of what experts acknowledge is a glacially slow recovery. The early freeze this year means overall growth for 2014 is unlikely to top 2 percent.

Even as the economy recovers, it is clear the Great Recession has left lingering scars on the economy. Asked to compare their current income to 2008, as the housing crash was wreaking havoc, more than two-thirds of respondents said they are today only treading water financially or are worse off, a recent Federal Reserve report showed.

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Consumer confidence, while increasing, remains brittle. A Rutgers University survey last month found that Americans are more worried about the economy now than in 2009, after the Great Recession officially ended.

One important reason for that fragile confidence: Wage growth, already weak in the decades leading up to the housing crash, has remained tepid during the recovery. Average hourly earnings for private workers rose only six cents in August, to $24.53, the Labor Department said. For the year hourly pay has grown only 2.1 percent.

At the same time, most of the economic gains during the recovery have gone to wealthier households, according to the liberal-leaning Economic Policy Institute.

More than 4 of 10 Americans report having experienced at least one major financial hardship, such as a job layoff or trouble paying for health care, over the past year, according to a Pew Research Center survey out this week. Among households earning less than $30,000 a year, fully two-thirds of families have faced such problems.

Weak hiring last month seems to bear out Federal Reserve Chief Janet Yellen's view that the economy remains slack. She has warned against moving prematurely to raise short-term interest rates, resisting pressure from more hawkish central bank officials who fear that such "easy money" will spur inflation.

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    Alain Sherter covers business and economic affairs for CBSNews.com.