Bleak jobs report offers recession-like whiff

By Mark Felsenthal - Analysis

WASHINGTON (Reuters) - Surprisingly dismal data on U.S. employment on Friday heightened fears of a full-blown recession and strengthened the case Democrats are making for further government stimulus to cushion the blow just two months before U.S. elections.

The U.S. jobless rate jumped to 6.1 percent in August, nearly a 5-year high as the economy shed 84,000 jobs, the Labor Department said. It was the eighth consecutive month the economy lost jobs.

The last time U.S. employers cut jobs for that many months in a row was October 2001 to May 2002, as the economy was exiting recession and entering a jobless recovery.

"This employment report has recession written all over it," said Michael Gregory of BMO Capital Markets in Toronto.

Democratic Rep. Nancy Pelosi, the speaker of the U.S. House of Representatives, promised to begin work immediately on a second economic stimulus plan to piggyback on measures approved by Congress and President George W. Bush earlier this year.

That earlier effort to pump $152 billion into the economy helped push U.S. gross domestic product up at a solid 3.3 percent annual rate in the second quarter, after a meager 0.9 percent expansion at the start of the year and a 0.2 percent contraction at the tail end of 2007.

Now, many analysts warn the economy may once again be gasping for air.

"The report confirms that the improvement in GDP growth to 3.3 percent in the second quarter was just a head-fake," said Nigel Gault, chief U.S. economist for Global Insight in Lexington, Massachusetts.

Democratic presidential candidate Sen. Barack Obama has called for a second $50 billion stimulus package, and one of his top economic advisers on Friday challenged rival Republican candidate Sen. John McCain to support a fresh effort when lawmakers reconvene before the November 4 election.

"We need another round," Obama aide Jason Furman said on CNBC.

The White House, however, rejected the need for another cash infusion to shield Americans from the effects of the economic slowdown, saying job growth has not caught up with the effects of the stimulus.

"The economic stimulus plan that we put in place is having the strong impact that we wanted it to have," White House spokeswoman Dana Perino told reporters. "We don't think that we need to consider a second stimulus right now."

McCain, speaking in Cedarburg, Wisconsin, said the weak labor market showed challenges facing American families.

"These are tough times. Today the jobs report is another reminder," he said. He promised to keep taxes low and cut them when possible.

McCain in a statement also vowed to enact a jobs program and retrain workers.