U.S. employers in August likely cut jobs by the least amount in a year, a sign of healing in the labor market as the economy starts to claw out of the worst recession in 70 years, according to a Reuters survey. Analysts said much of the slowdown in the pace of layoffs was due to a rebound in manufacturing, with automakers increasing output to meet a surge in demand, triggered by the "cash-for-clunkers" program. The unemployment rate was forecast to have inched up in August after dipping slightly the previous month, as the economy`s improving prospects lured discouraged job seekers back into the labor market. The survey of 81 economists forecast employers cut 225,000 jobs in August, which would be the least amount for any month since August 2008, after laying off 247,000 workers in July. They saw the unemployment rate edging up to 9.5 percent from 9.4 percent, which was the first dip since April 2008. The Labor Department will release the August employment report on Friday at 8:30 a.m. (1230 GMT). "Job losses are tapering off, you are hearing less announcements of layoffs by large companies. The auto industry is producing more cars and the trend that started in July will be carried over into August," said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. The government`s "cash-for-clunkers" program, which gave drivers a discount to trade in old gas guzzlers for fuel efficient vehicles, unleashed a surge in demand for autos, prompting General Motors, among others, to raise production. The No. 1 U.S. carmaker said last month it would bring back about 1,350 hourly workers in the U.S. and Canada to assembly plants. Analysts said the incentive, which ended last week, had helped to stabilize employment in manufacturing. They expected companies, who they said probably overreacted to the slump in demand by aggressively axing jobs, to start hiring new workers as they rebuild inventories that have been reduced to record low levels. CUT TO THE BONE "We believe that firms cut their staffing levels to the bone early in 2009 and will be forced to rehire quickly as activity begins to rise," said Stephen Stanley, chief economist at RBS in Greenwich, Connecticut. "Already, there have been scattered anecdotes that companies are bringing laid-off workers back, most prominently in the auto industry and we look for these stories to become increasingly frequent going forward." The Institute for Supply Management survey for August, released on Tuesday, showed manufacturing employment still contracting, but the index was at its highest in a year. Labor market stability is crucial for the economy`s recovery from a devastating recession that started in December 2007. While data continue to suggest a recovery is underway, high unemployment is casting doubts over its sustainability. Unemployment is putting pressure on household incomes, restraining their capacity to spend. Consumer spending accounts for about 70 percent of U.S. economic activity.