WASHINGTON (AP) – The nation’s unemployment rate dipped to a four-year low of 4.9 percent in August as companies added 169,000 jobs, a sign that the labor market continued to gain traction before Hurricane Katrina struck.

The latest snapshot of the United States’ jobs climate, released by the Labor Department on Friday, buttressed observations by Federal Reserve Chairman Alan Greenspan and his colleagues that the hiring situation was gradually improving – a bit of good news for workers as they headed into the Labor Day weekend.

But the future of the nation’s employment picture is murky – clouded by fallout from the devastating hurricane.

Friday’s figures don’t reflect the impact of Katrina because the data was collected before the storm slammed into New Orleans and a swath of Gulf Coast communities.

The 4.9 percent unemployment rate reported for August was down a notch from July’s 5 percent rate and was the lowest since August 2001.

Treasury Secretary John Snow noted this improvement and said it showed the economy had good momentum that would enable it to withstand the economic fallout from Katrina and surging oil prices. Snow said growth would be a bit slower for a brief period of a quarter or two.

“I am confident, based on the strong economy that we have, that we will recover and recover well,” he said. Snow, who cut short a vacation in London to return to Washington Friday, spoke to reporters at a late afternoon news conference at the Treasury Department after a meeting with Federal Reserve Chairman Alan Greenspan.

“The economy is motoring along and we are indeed creating more than a decent amount of jobs. But there are a number of hurdles that lie in our path of prosperity – record energy prices and the economic consequences of Hurricane Katrina,” said Richard Yamarone, economist at Argus Research.

On Wall Street, the Dow Jones industrials lost 12.26 points to close at 10,447.37.

President Bush, whose job approval ratings have been sinking in recent polls, has been confronted by new economic challenges from Hurricane Katrina, which has catapulted lofty gasoline and other energy prices even higher.

Hundreds of thousands of people have been thrust out of work in parts of Louisiana, Mississippi and Alabama because of Katrina. The situation probably will propel area unemployment rates now in the single digits to the double digits in coming months – even when one accounts for employment gains from rebuilding efforts, economists said.

Against the backdrop of economic uncertainty created by the hurricane and skyrocketing energy prices, a growing number of economists believe the Federal Reserve may decide to hold interest rates steady at its next meeting on Sept. 20.

In Friday’s report, U.S. employers added 169,000 jobs in August, reflecting increased employment in industries, including construction, professional and business services, health care and education, and financial activities. But manufacturers shed jobs for the third straight month, reflecting the industry’s sometimes bumpy road to recovery from the 2001 recession.

Also encouraging was that payroll gains were revised up for both June and July. Employers in July added 242,000 jobs, an improvement from the government’s initial estimate of 207,000 net job gains. For June, 175,000 jobs were added, up from a previous estimate of a 166,000 jobs gain.

The payroll gain of 169,000 reported for August was less than the 190,000 new jobs some economists were forecasting before the release of the report. Economists were predicting the unemployment would hold steady at July’s 5 percent rate.

Professional and business services added 29,000 jobs in August. Financial companies added 15,000. Education and health services expanded employment by 43,000. Leisure and hospitality added 34,000 jobs. Retailers added close to 12,000 during the month. Construction companies boosted payrolls by 25,000.

But factories cut another 14,000 jobs in August. Auto makers accounted for the biggest chunk of those job losses.

The labor market is the one part of the economy that has had difficulty getting back to full throttle after the 2001 recession.

Jobseekers still face challenges. The report showed that the average time that the 7.4 million unemployed spent searching for work in August was 18.9 weeks, up from 17.6 weeks in July.

Those who do have jobs are seeing wages rising. Average weekly earnings climbed to $544.59 in August, up from $543.92 in July. The figures aren’t adjusted for inflation.

AP-ES-09-02-05 1920EDT

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