Upswing in Jobs Fuels the State’s Recovery : Economy: In Los Angeles County, however, unemployment rate rises to 8.6% from 8.4% in the prior month.

California’s long-awaited economic recovery gained strength last month, with businesses adding more than 28,000 new jobs statewide, helping trim the state unemployment rate to 7.8% from 7.9% in July, the Labor Department reported Friday.

After trailing far behind the nation during the current business cycle, California is now closing the jobs gap, helped by strong performances in sales of exports, production of high-tech goods and revenues from entertainment and tourism, analysts said.

California “is beginning to outperform the nation in terms of job growth,” said Lynn Reaser, chief economist for First Interstate Bank in Los Angeles. The business revival is “picking up some momentum,” she said.

California has generated more than 110,000 jobs this year.

“The state is in recovery and the recession is over” said Stephen Levy, director and senior economist at the Center for the Continuing Study of the California Economy, a research organization in Palo Alto. But construction is still lagging, and that makes the difference between having a modest recovery in the state and returning to boom times, Levy said.

The nation’s unemployment rate also declined last month, falling to 5.6% from 5.7% in July. With inflation under control and the economy growing, although at a tepid pace, there is little pressure on the Federal Reserve Board to lessen interest rates further, economists suggested.

Los Angeles County, where the monthly jobless figures are highly volatile, had an increase in its unemployment rate, to 8.6% from 8.4% in the prior month. The number of people at work in the county rose, but not fast enough to keep pace with the rise in the labor force. As conditions improve, previously discouraged workers renew their search for jobs.

After expanding at a rapid clip in the first quarter, with employment rising by 226,000 jobs a month, the U.S. economy has slipped into lower gear. The nation had an average growth of just 100,000 jobs a month during the past five months.

National payrolls increased by 249,000 during August, but the figure is less impressive than it appears at first glance because more than 70,000 of the total represented government jobs, primarily schoolteachers returning to work. The longer-term trend of 100,000 jobs a month is the more significant figure, analysts said.

Across the nation, “we’re seeing pretty weak job growth,” said Dean Baker of the Economic Policy Institute, a liberal think tank in Washington. “There is not any significant deterioration, but on the other hand, things are not improving for many people,” he said.

Tepid seems to be the adjective to describe the national job market. “We’ve got modest growth and are generally doing OK,” but the numbers demonstrate that “we may have a very fragile economy,” said Robert Barr, an economist with the U.S. Chamber of Commerce.

The uncertainty was underscored by two other reports issued Friday. The government’s gauge of future economic performance--the index of leading indicators that helps preview business activity six to nine months in the future--dipped 0.2% during July. It had climbed in June after four months of decline. The index includes such items as new orders for industrial equipment, building permits and orders for manufactured goods.

The second piece of sobering news came from the National Assn. of Purchasing Management, which reported that its index of business activity was 46.9 last month, down from 50.5 in July.

The latest reports triggered a decline in bond interest rates and a rally in stock prices as investors reasoned that modest economic growth, with low inflation and little risk of recession, will continue. The yield of the benchmark 30-year Treasury bond fell to 6.61% from 6.65% on Thursday--its lowest level in seven weeks--while the Dow Jones industrial average jumped 36.98 points to close at 4647.54.

It would probably take a steady barrage of bad news--higher unemployment and several more months of discouraging reports about leading indicators--to prompt the Fed to take further steps to drive down interest rates. The Fed lowered interest rates in July, but avoided any action at the meeting of its Open Market Committee last month.

“Right now the Fed is in the right spot,” said Bruce DeVine, chief economist for the Southern California Assn. of Governments. “I do not see a recession coming,” he said while also warning that the nation could slip into a period of “zero” growth.

However, DeVine and other California-based economists are bullish about the state because of steady improvement in job creation after a long drought.

Just a year ago, the national jobless rate was 5.9%, while California had an 8.6% figure, and Los Angeles County struggled with a rate of 10.3%.

The gap has narrowed significantly, strong evidence that the state is no longer the stepchild of the economic revival. August’s comparable figures were 5.6% for the nation, 7.8% for the state and 8.6% for the county.

One gap that remains to be closed is in construction. The government reported that national construction outlays rose 2% in July, the largest gain since November, 1993. But California construction remains in the doldrums.

“Normally at this part of the cycle we would have a boom in construction. But there has been so much bad news,” that prospective home buyers are frightened away, Levy said. The perception that a recovery is under way is “just beginning to seep into reality for most people,” he said.

The Labor Department said there were 124.8 million Americans working last month, and 7.4 million unemployed. In California, 14.3 million were at work and 1.2 million unemployed. Los Angeles County had 4 million people working, and 380,000 unemployed.