WASHINGTON -- More cuts in short-term interest rates, including a reduction in the discount rate to 2.5% from 3%, may follow in the wreckage of Friday's Labor Department's report showing widespread job losses, analysts say.

The report, which gave fresh momentum to the bond market, also seemed to add to the political woes of President Bush with a ringing message that the wobbly economy could be stumbling once again.

The one factor that seems to be temporarily restraining the Federal Reserve is the dollar, analysts said. The August drumming of the U.S. currency to all-time lows of under 1.40 against the German mark, fueled by foreign political uncertainties about the U.S. election campaign, stopped the last bond market rally.

But the latest unemployment data swept away any idea that the U.S. economy is gaining ground and spurred talk of further election-year easing by the Fed. The speculation came even though the central bank added reserves to the banking system Friday to trim the federal funds rate to 3% from 3.25%. The rate cut came two months after the Fed cut the discount rate to 3% from 3.5% on July 2.

"We've heard the theme so many times, that this is the last easing in Fed policy," said William Sullivan, director of money market research at Dean Witter Reynolds Inc. "I would have to say that the Fed is not predisposed to cutting the discount rate any time soon, but another month's worth of disappointing payroll data, and you could get a cut."

Philip Braverman, chief economist of DKB Securities Corp., said he continues to look for more assistance from the Fed. "The economy is literally retreating. We've got a growth recession that's in a triple dip. This is the third leg down."

Mr. Braverman, who has been making consistently correct calls for lower rates, added, "Market yields have further to go, and there's further easing by the Fed because there's no prospect of anything significant on the horizon in terms of growth."

The Labor Department report came as a shocker to Wall Street analysts who had been expecting scattered gains in the August job market. The civilian unemployment rate slipped for the second month in a row, to 7.6%, but the decrease came largely on a reduction in the teenage work force while the jobless rate for adults edged up to 7.3%.

Jobless rates in the big industrial states, where Mr. Bush and Democratic candidate Bill Clinton are expected to slug it out in the fall, remained high. In California, the unemployment rate jumped to 9.8% -- the highest of the 11 largest states. Florida and New York recorded rates of 8.8% and 8.5%, respectively.

The biggest surprise came in the department's non-farm payroll series, where jobs fell by 83,000. Excluding government and the summer youth programs set up by federal officials, non-farm payrolls fell by 167,000 with declines in most major categories. Manufacturing firms shed 97,000 jobs, the second decrease in the last three months, and retail trade had 71,000 job losses.

The White House tried to see a bright side in the figures, issuing a release that called the decrease in the unemployment rate "an encouraging sign that the economy is improving."

But the statement drew sneers from analysts. "That is one of the great stretches of modern political rhetoric," said David Resler, chief economist for Nomura Securities Co.

Mr. Resler, who has a forecasting model that shows President Bush losing re-election by 120 votes in the electoral college, said the latest employment report "will cause even further dissatisfaction in the public opinion polls."

Democrats jumped on the unemployment report as more evidence that the President's economic policies have been wanting. "Our economy is in serious trouble, and there's no plan to fix it," said Sen. Donald Riegle, D-Mich. "There is an urgent need for a new economic growth strategy that can rebuild the job base in America."

The employment report capped a series of recent statistics that showed the economy was slogging along. The Conference Board's consumer confidence index fell in August, as did the purchasing manager's report. Moreover, new home sales tumbled 2.6% in July, marking the second straight monthly drop.

The Bush administration had to face other embarrassing reports last week. The Census Bureau reported that median household income fell in 1991 for the second year in a row and that the U.S. poverty rate rose to 14.2%.

There could be more discouraging statistics ahead for Mr. Bush, analysts said. Many are expecting the September employment report to show a rise in joblessness from Hurricane Andrew and the end of the government's summer jobs programs.

David, Wyss, senior vice president of DRI/McGraw-Hill, the Lexington, Mass., forecasting firm, said he expects third-quarter gross domestic product to be around 1.5%, which would continue the same sluggish pace reported in the second quarter. "The recession's over, but we can't get a recovery going. It's sclerosis," he said.

Others were even more pessimistic. "Job growth has to be the key to recovery," said Robert Brusca, chief economist for Nikko Securities Co. International. "If you can't get the job growth, you don't have a recovery. It's that simple.

The Fed's move to trim the federal funds rate also came in for criticism as another timid step that would not do much good. "The Federal Reserve has masterfully maneuvered us into a position where 25 months after the recession started, we have nothing that looks like a recovery, and a currency crisis to boot," Mr. Brusca said.

Aggressive Fed easing would help the dollar rather than hurt it by eliminating uncertainties over monetary policy and reviving prospects for U.S. growth, Mr. Braverman said.

Fed officials are not likely to abandon their approach of moving cautiously on rates, given the weak dollar, Mr. Wyss said. "They're afraid of sending the dollar down further."

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