U.S. Jobless Rate at 6.8%, Signals Feeble Recovery : Economy: In California, the unemployment rate dropped last month from 7.6% to 7.3%

The nation’s economy began creating more jobs again last month, the government reported Friday, but the increase was relatively modest, showing that the recovery continues to be anemic.

The Labor Department’s monthly report showed that America’s payrolls grew by 34,000 in August after a 43,000-job decline the previous month. At the same time, a large number of discouraged job-seekers stopped looking for work altogether.

As a result, the overall unemployment rate remained unchanged at 6.8% of the work force. By contrast, the jobless rate for California fell to 7.3% in August, down from 7.6% in July. However, the state figures are based on a smaller survey and often are more volatile.

Analysts differed over what the new figures meant, including the crucial issue of whether the continuing weakness in employment would soon prompt the Federal Reserve to push interest rates down further.

Allen Sinai, economist for the Boston Co., a New York-based investment firm, said the new numbers showed that the economy “is recovering little by little, piece by piece,” with solid gains in manufacturing industries but continuing declines in other key sectors.

“In the context of this weak economy, the Fed will somewhere along the way nudge rates lower,” Sinai said.

Nevertheless, the report set off new political sparks.

Congressional Democrats, who are seeking to force President Bush to authorize an extension of current unemployment insurance benefits, sought to capitalize on the figures to bolster their point of view.

In a statement issued to reporters, House Majority Leader Richard A. Gephardt (D-Mo.) complained that “the Republican recession has created an economic emergency in America, and it’s time to do something about it.”

But Michael J. Boskin, President Bush’s chief economic adviser, cited the report as further evidence that the economy was recovering gradually. “I haven’t said the economy is healthy,” he cautioned reporters. “I have said it’s improving.”

Boskin also repeated earlier Administration calls for the Federal Reserve to reduce interest rates further. Fed Chairman Alan Greenspan has said that the central bank is worried that doing so now might exacerbate inflation. But the economy has continued weak.

The failure of the unemployment rate to change nationally was the result of a variety of factors. Although payroll levels grew, the number of people listed as employed--counted on a more-comprehensive survey--fell by 296,000, after a 172,000-job decline in July.

At the same time, a substantial number of Americans--mostly women and teen-agers--apparently became so discouraged that they simply stopped looking for work. That, in turn, reduced the size of the total labor force, upon which the unemployment rate figure is computed.

Even so, not all the figures this time were bleak. The report showed that the total number of jobs in the manufacturing sector rose by 42,000 in August, after a weaker 25,000-job upswing in July--with particularly strong gains in industries related to auto production.

Another key indicator, the length of the average workweek, generally also improved, edging up 18 minutes in August to 34.4 hours, while that for manufacturing rose by 12 minutes, to 40.9 hours. Wage levels increased 0.5%.

But Janet L. Norwood, commissioner of labor statistics, pointed out that most service industries continued to be weak. Wholesale and retail trade posted losses of 33,000 jobs over the month, while state and local governments lost 40,000 jobs.

The major exceptions were in medical services and in some business services.

In a typical assessment, Bruce Steinberg, an economist with Merrill Lynch Capital Markets in New York, said the figures show that “the economy is dichotomized. The industrial sector is reviving nicely, but the service sector is lagging.”

The 6.8% jobless rate technically was significantly lower than the 7% rate that the economy reached at its most-recent peak in June. But it still was far higher than the 6% levels that prevailed before the most recent slump.

Unemployment in California peaked in June at 8.2%, the equivalent of 1,208,000 potential workers unable to find jobs, the Bureau of Labor Statistics reported from its San Francisco office.

Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto, said he viewed the declining rates “as a correction, probably a statistical fluke.” He said they “flop around a lot in the summer.”

The Associated Press contributed to this story.

California Unemployment

Percent of work force, seasonally adjusted

August, 1991: 7.3% Source: Employment Development Department

National Unemployment

Percent of work force, seasonally adjusted

August, ‘91: 6.8%

July, ‘91: 6.8%

August, ‘90: 5.6% Source: Labor Department