WASHINGTON – Another important sign of a firming economic recovery emerged Friday from government statistics showing a slowdown in the torrid pace of job losses, even as a larger-than-expected rise in the unemployment rate to 9.7 percent signaled a long road ahead before Americans feel a return to normalcy.

Employers shed 216,000 jobs in August, a significant slowdown from the revised 276,000 jobs lost in July. Following a key manufacturing index showing growth for the first time in 18 months and recent signs that the housing market is firming, Friday's job numbers from the Bureau of Labor Statistics are one more indication that the U.S. economy appears to have hit bottom and is beginning to rebound.

However, the still-rising unemployment rate – up from 9.4 percent in July to the highest rate in more than 26 years – will continue to dampen consumer confidence and business hiring.

"The job market is on the mend but has a long, painful recovery ahead of it. Businesses are scaling back their layoffs, but they have yet to increase their hiring," said Mark Zandi, chief economist for Moody's Economy.com. "It won't be until next year before job growth resumes, as the leading indicators – including near record-low hours worked and falling temporary-help jobs – remain weak."

The significance of Friday's report is that it shows job losses continuing to improve steadily.

"That really is what is important," Christina Romer, who heads the White House Council of Economic Advisers, said on CNBC television. "It's still a terrible number, but it is certainly showing those numbers moderating."

Health care was the only bright spot in Friday's report. The sector added more than 28,000 jobs, while the construction and manufacturing sectors posted another month of big losses, 65,000 and 63,000 positions, respectively.

In service industries, both retail sales and financial services lost fewer jobs than they had in previous months, another positive sign.

The Department of Labor report also showed 16.8 percent of the work force underemployed or unemployed.

Since the recession began in December 2007, the number of unemployed has risen by 7.4 million and the unemployment rate has increased by 4.8 percentage points. Some 14.9 million Americans are unemployed; when rounded as a percentage, one in 10 working-age Americans is jobless.

"Very few sectors actually added jobs, but most saw slower rates of decline," Nigel Gault, the chief U.S. economist for forecaster IHS Global Insight, summed up in a research note.

Still, other data remained grim.

"With the workweek flat and temporary help still declining, there were no leading indicators in the report suggesting that we'll actually be adding jobs this year," Gault said.

"The president has said from the beginning it's a long, hard slog," Romer said, noting that August's job losses had returned to the pace they were before last September's near-collapse of the global financial system.

Nearly 5 million Americans have been unemployed for six months or longer, putting renewed pressure on Congress and the Obama administration to extend unemployment benefits again.

The National Employment Law Project, an advocacy group for extending jobless benefits, said in a statement that the number of long-term unemployed was now three times what it was a year ago.

Despite the slowing pace of job losses, the unemployment rate is expected to keep ticking upward this year because there are more new entrants in the work force and more people giving up looking for work.

"The unemployment rate has begun to rise more slowly as the rate of employment contraction has moderated, but it will tend to rise even in the early stage of labor market expansion, when job growth falls short of labor force growth," Alan Levenson, the chief economist for investment manager T. Rowe Price, said in a research note.

Supporters of the government's economic stimulus efforts contend that Friday's numbers underscore how the $787 billion package that passed earlier this year is starting to be felt across the economy.

Many independent economists agree.

"The subdued job losses are now a third of what they were before the stimulus plan hit the street and wage growth picked up, both further signs of stabilization," forecaster RDQ Economics wrote in a research note. "Of course, unemployment is still heading up and has more to go, so we are far from out of the woods yet."

Call Kevin G. Hall, McClatchy Washington Bureau, (202) 383-6038.