The unemployment rate unexpectedly fell to 5.7% in August as the pool of potential workers shrunk and the economy added slightly more jobs than expected.

The economy created 39,000 jobs in the month as service industries like retailing and transportation saw payrolls jump by 72,000. The Labor Department also upwardly revised its estimate of the number of jobs added in July to 67,000 from about 6,000. July's unemployment rate was 5.9%.

At 5.7% the unemployment rate is at its lowest level since March. Economists had expected payrolls to rise by 30,000 last month and had forecast a headline jobless number of 6%. Nevertheless, the economy has still shed 48,000 jobs in 2002.

Part of the reason for the rise in the marquee number is a decline in the available labor pool to 12.6 million from 13.2 million in July. The figure comprises unemployed job seekers and people with jobs who nonetheless looked for work in the last 12 months.

Service employment rose 72,000 in August, after soaring 108,000 the previous month. Health care added 26,000 jobs, temp companies added 51,000, construction payrolls rose by 34,000, and government employment increased by 41,000 in August.

On the down side, factories gave up 68,000 jobs in August, the most since January, while the manufacturing workweek rose to 40.8 hours from 40.7 in July.

Overall, the average weekly hours worked rose to 34.1 from 34 in July. Workers' average hourly earnings rose 3%, or 4 cents, after a 0.2% increase the previous month. Economists had expected a 0.3% increase in hourly wages. Average weekly earnings rose to $505.36 last month from $502.52 in July.