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Economy Sheds 95,000 Jobs in September

The economy shed more jobs than expected in September, with private sector employment showing only modest growth and government employment falling sharply, the Labor Department said on Friday.

(Updated with additional information and analyst commentary.)

NEW YORK (

TheStreet

) -- The economy shed more jobs than expected in September, with private sector employment showing only modest growth and government employment falling sharply, the Labor Department said on Friday.

Non-farm payrolls fell 95,000 in September. Economists were expecting the figure to be largely unchanged, according to consensus estimates from

Briefing.com

.

The fall was probably steeper because of the downward revisions made to previous employment figures reported in July and August. Total nonfarm employment fell 66,000 in July as opposed to 54,000 previously. In August, nonfarm employment fell 57,000, higher than the 54,000 originally estimated.

Still, the private sector added only 64,000 jobs during the month, lower than the projected increase of 75,000. Estimates of economists polled by

TheStreet

ranged from 60,000 to 100,000. Estimates at the lower end of the range took into account the fact that

September has been a historically weak month for the job market.

The Government shed 159,000 jobs reflecting both a drop in temporary jobs related to the Census and job losses in local government.

Economists were expecting more job losses at the local government level, as state governments continue to face heavy deficits and are starting to make steep cuts to education.

"The headline number was worse than expected. But people expected the government jobs number to be bad. It was a question of this month or next month. The other numbers were pretty much on target," said Doug Roberts, chief investment strategist at Channel Capital Research. Roberts also pointed out that nearly 52,000 out of the 64,000 private sector jobs added came from healthcare and services, which did not suggest a robust recovery.

The breakdown of September employment figures by industry showed continued growth of jobs in the healthcare sector, which added 24,000 jobs in September. The sector has added 21,000 jobs per month on an average this year.

The services sector added 28,000 jobs, with temporary help accounting for most of the gains. Leisure and hospitality showed the strongest addition to jobs, employing 34,000 more people over the month.

Construction, which has borne the brunt of the recession, shed 21,000 in September after adding 19,000 jobs in August. The sector has shown little change in payrolls this year.

Employment in manufacturing, wholesale and retail trade were little changed.

The unemployment rate, however, remained unchanged at 9.6%. Economists were expecting the rate to tick up to 9.7%. The number of discouraged workers -- those who no longer look for work because they believe no jobs are available -- rose by 503,000 to 1.2 million.

The average workweek for all employees remained unchanged at 34.2 hours. Average hourly earnings rose 1 cent to $22.67 in September.

With the employment situation continuing to disappoint a month before the mid-term elections, the markets are anticipating further pressure on the

Federal Reserve

to resume its bond purchase program and boost the economy.

"Most FOMC members will see that the September jobs report is a "yellow light" for the economy but that is not good enough to prevent the FOMC (with perhaps a dissent or two) from launching a second round of quantitative easing (QE II) at their November or December meeting," PNC economists Stuart Hoffman and Kurt Rankin wrote in a note.

Stocks were reversing losses in forenoon trading. The

Dow Jones Industrial Average

was rising 51 points or 0.5% to 10999. The

S&P 500

was up 5 points at 1163 while the

NASDAQ

was up 8 points to 2392.

-- Written by Shanthi Venkataraman in New York.

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