WASHINGTON - The economy is showing consistent signs of improvement, but probably not enough to stop employers from cutting jobs or to keep the unemployment rate from rising.

The Labor Department is expected to report Friday that the jobless rate increased to 9.5 percent in August, from 9.4 percent in July, as employers cut 225,000 jobs.

The employment report will follow other recent data that shows the economy is pulling out of the worst recession since World War II. A trade group reported Tuesday that the manufacturing sector grew in August for the first time in 19 months, while home sales have increased for several months.

But the economy isn't expected to grow strongly enough this year to persuade companies to ramp up hiring. Most economists expect the unemployment rate to top 10 percent by early next year.

"We have a very long, painful healing process ahead," said Bruce Kasman, chief economist at JPMorgan Chase & Co. "The good news is we're starting it, the bad news is we need much faster growth" to bring the employment rate down.

A loss of 225,000 jobs would be the smallest monthly decline since last year, a sign that layoffs are easing. Employers cut 247,000 jobs in July, compared with an average of 691,000 per month in the first quarter.

Still, the job cuts are holding down wages and salaries, while credit remains tight and home prices and stock portfolios have fallen. All those trends are restraining consumer spending, which makes up 70 percent of the U.S. economy, and could weaken the recovery.

Most retailers posted sales declines last month as shoppers limited back-to-school purchases to focus on necessities. Discounters did better than upscale chains, but the results Thursday raised further concern about the upcoming holiday season.

Other economic news on Thursday was mixed. The Institute for Supply Management, a trade group, said the service sector inched closer to growth in August, but still contracted for the 11th straight month.

The ISM's services index, which covers hospitals, retailers, financial services companies and more, rose to 48.4, up from 46.4 in July. Still, readings below 50 indicate the sector is shrinking.

In a separate report, the Labor Department said the number of laid-off workers applying for benefits dipped to 570,000 last week from an upwardly revised 574,000. That was a weaker performance than the drop to 560,000 claims that economists projected.

The number of people receiving jobless benefits totaled 6.23 million, up 92,000 from the previous week, which had been the lowest level since April.