The US labor market moved closer to recovery in August as job losses narrowed to 216,000 while the unemployment rate rose to 9.7 percent, according to data Friday suggesting improving economic conditions.

The Labor Department said the jobless rate rose three-tenths of a point to the highest level since June 1983, but the data nonetheless showed an easing of the massive pace of job losses in an economy struggling to emerge from recession.

The monthly payrolls report, seen as one of the best indicators of economic momentum, showed an improving trend even though the numbers remained negative.

Revised data showed 276,000 jobs lost in July and 463,000 in June, higher than prior estimates of 247,000 and 443,000, respectively. Yet the trend showed steady improvement from a peak of 741,000 losses in January.

"The good news is job losses are slowing. The bad news is joblessness continues to mount," said Sal Guatieri, economist at BMO Capital Markets.

"Our sense is job losses may continue for a couple of more months, which can only act to impede a consumer-led recovery."

Guatieri said the report and other data suggest US gross domestic product will grow at a 3.8 percent pace in the current quarter.

"But the bigger question is the sustainability of the recovery beyond the third quarter," he said. "Until we see a return of job growth the risks lie on the downside."

The consensus expectation was for 230,000 job losses and an unemployment rate of 9.5 percent in August.

White House spokesman Robert Gibbs said the number of job losses was the lowest in over a year and showed movement in the right direction.

But he added that President Barack Obama "won't be satisfied until we are creating jobs and we are putting millions of people back to work."

Mark Vitner at Wells Fargo Securities said the figures are consistent with economic recovery but that more job losses are likely in the coming months.

"We are seeing a little bit of improvement in the rate of jobs lost but 216,00 is still a significant loss," he said.

"If you extend the trend you would think it would turn positive in the next six months."

The civilian labor force rose by 73,000 in August, suggesting more people are returning to the workforce to seek employment in anticipation of better conditions.

The US economy shrank at a 1.0 percent annual pace in the second quarter, reflecting an easing of the deep recession that led to a 6.4 percent pace of decline in the first quarter.

Many economists expect the world's biggest economy to show growth in the current quarter although difficult labor market conditions could crimp consumer spending and dampen any recovery.

Sophia Koropeckyj at Moody's Economy.com said unemployment could well top 10 percent in 2010.

"Payroll gains are not expected until the second half of 2010," she said.

"As consumer and business confidence improves, more workers will start looking for jobs again and more new entrants will step into the fray. This will drive the unemployment rate higher; it is expected to peak above 10 percent in mid-2010."

Joel Naroff at Naroff Economic Advisors said the report is positive.

"The trend is in the right direction and that is what matters. It could take another six months or even more before we turn positive on jobs and even then the increases are likely to be modest. Still, the market is healing slowly," he said.

The August data showed a loss of 136,000 jobs in the goods-producing sectors including 63,000 in manufacturing and 65,000 in construction.

The services sector shed 80,000 jobs including 10,000 in retail.

The only segment showing growth was education and health care, with 52,000 jobs added.

The average workweek in the private sector was unchanged at 33.1 hours. but overall aggregate hours worked fell 0.3 percent.

Average hourly earnings of private production and nonsupervisory workers rose 0.3 percent.