WASHINGTON (Reuters) - The U.S. economy shed jobs for a fourth straight month in September, hit by government layoffs and slower private hiring, hardening expectations of more stimulus from the Federal Reserve.

The dollar tumbled to a 15-year low against the yen as investors concluded that Friday’s weak jobs data meant the U.S. central bank at its November 2-3 meeting was almost certain to pump hundreds of billions of new dollars into the economy.

The employment report was the last before the November 2 mid-term congressional elections and was a blow for President Barack Obama’s Democratic Party, trailing in opinion polls.

Obama sought to stress that private-sector jobs were still growing but said state and local governments needed help to keep workers who provide vital services.

“These continuing layoffs of state and local government ... would have been even worse without the federal help that we’ve provided to states in the last 20 months,” Obama said.

Non-farm payrolls dropped 95,000, the Labor Department said, pulled down by the end of temporary jobs for the U.S. Census and steep losses at struggling local governments.

Private employment, a better gauge of the labor market, rose 64,000 after a 93,000 gain in August, below levels that would suggest a self-sustaining recovery from the recession.

The unemployment rate was steady at 9.6 percent.

Economists had expected overall payrolls would be unchanged, with private-sector hiring gaining 75,000 and the jobless rate ticking up to 9.7 percent.

Friday’s data came as top finance officials from around the world gathered for International Monetary Fund meetings in Washington, where the plunging dollar and rising emerging market currencies are top of the agenda.

Prices for U.S. government debt rose as investors bet on the Fed buying more bonds. Stocks on Wall Street gained, with the blue-chip Dow Jones industrial average closing above 11,000 for the first time since May 3.

“I think the Fed is going to act in November. They need to press harder on the accelerator,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania.

FURTHER EASING NOT A DONE DEAL

Some Fed officials are not so sure. St. Louis Fed President James Bullard told CNBC television that policymakers could wait until December for more data on the economy’s outlook.

“This upcoming FOMC meeting is going to be a tough call because the economy has slowed, but it hasn’t slowed so much that it’s an obvious case to do something,” Bullard said.

The recovery from the longest and deepest downturn since the 1930s has slowed, but neither Fed officials nor many economists believe a new downturn is likely.

The U.S. central bank cut interest rates to near zero in December 2008 and has pumped $1.7 trillion into the economy by buying mortgage-related securities and government bonds.

A man walks out of a job fair for military veterans and other unemployed people in Los Angeles, California, October 7, 2010. REUTERS/Lucy Nicholson

“The economy continues to crawl forward at a sub-2 percent growth pace, enough to generate a handful of private sector jobs but not enough to prevent the unemployment rate from rising further in coming months,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.

The government revised data for July and August to show 15,000 more jobs were lost than previously reported.

It also said its preliminary benchmark revision estimate indicated employment in the 12 months to March had been overstated by 366,000.

Overall payrolls in September were depressed by the end of 77,000 temporary Census jobs and the loss of 76,000 local government jobs, about two-thirds of which were teachers. That cut overall government employment by 159,000.

CLIMATE OF UNCERTAINTY

Speaking during a visit at a family-owned small business in Maryland, Obama said everything possible had to be done to accelerate the recovery.

“The only piece of economic news that folks still looking for work want to hear is, ‘You’re hired.’ And everything we do is dedicated to make that happen,” he said

But Republicans, who are tipped to win control of the U.S. House of Representatives in November, said the government’s policies had created a climate of uncertainty for businesses.

Private hiring last month was held back by goods-producing industries, where payrolls contracted 22,000 as manufacturing employment fell for second straight month. Construction jobs fell 21,000, reflecting the weak housing market.

Private-sector services jobs rose 86,000, similar to August’s gain. Temporary jobs, seen as a harbinger of permanent hiring, rose 16,900 last month after rising 17,700 in August.

“There is a lot of uncertainty. Demand is just not there to give businesses the confidence to go out and start hiring in a way that would cut into these numbers for the unemployed in a big way,” said Stephen Bronars, a senior economist at Welch Consulting in Washington.

The labor market’s slow healing was evident in the average workweek, flat at 34.2 hours for a third month. Average hourly earnings rose only one cent, which should keep consumer spending sluggish and the Fed worried about deflation.

Though the jobless rate was unchanged last month, a broader measure of unemployment that includes discouraged workers and those working part-time for economic reasons rose to 17.1 percent from 16.7 percent in August.

About 42 percent of the 14.8 million people unemployed in September had been out of work for six months or more.