Unemployment rate rises to 9.7 percent

The increase in the unemployment rate was larger than some anticipated, but the smaller number of jobs lost suggests the economy is continuing to improve. More jobs were lost in July, and monthly job losses between November 2008 and April, when the downturn was at its worst, were 645,000.

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In July, the rate dropped slightly, from 9.5 percent to 9.4 percent, but many economists attributed the decline to workers declining to look for jobs.

The new report comes amid a battle by Democrats and Republicans to frame the $787 billion stimulus package in a positive or negative light in advance of the 2010 midterm election.

Administration officials and congressional leaders in recent weeks have hailed the stimulus as helping to end the recession. Vice President Joe Biden on Thursday said the stimulus had helped create or save 750,000 jobs since it was created 200 days ago.

Polls show public ambivalence over whether the stimulus has helped the economy. Republicans have hammered it for contributing to record deficits, and have criticized the administration for statements earlier this year that predicted unemployment would top off at 8 percent.

Republican National Committee Chairman Michael Steele seized on the unemployment report Friday to criticize Biden.

“Yesterday Vice President Biden gave yet another speech to try to convince the American people that President Obama’s stimulus bill is creating the jobs he promised," Steele said in a statement. "Today’s unemployment report proves that this administration is ignoring reality."

The increase in the unemployment rate hints at the difficulty the economy will have in gearing up to create the jobs for those who have lost them during the recession. Many expect unemployment could hit double digits later this fall.

The U.S. Chamber of Commerce on Thursday said the recession is ending and predicted the economy will grow in the third and fourth quarters. But the business lobby’s chief economist also said labor markets will lag, and that it could take years for the unemployment rate to drop back to where it was before the recession began.

Chamber Chief Economist Martin Regalia said the stimulus, which the Chamber supported, had contributed to the economic turnaround, as had a $700 billion effort to bail out financial institutions and a number of unprecedented interventions by the Federal Reserve.