FARMINGTON — Unemployment in the Farmington area fell to 6.5 percent in August, but the improvement masked a worrisome drop in nonfarm employment.

The unemployment rate fell from 6.6 percent in July, and from 7.7 percent in August 2011, according to the New Mexico Department of Workforce Solutions.

However, the Farmington metropolitan statistical area lost 600 jobs from July to August. Job losses were widespread - the private sector lost 400 jobs, and government employment fell 200 jobs, according to a Workforce Solutions report released Friday.

In some cases, the unemployment rate can show improvement amid job losses if the number of people who are actively seeking work declines. The unemployment rate counts only those who actively seek work. Unemployed persons who are not actively seeking work are known as discouraged workers.

"We're seeing that trend nationwide," Workforce Solutions spokeswoman Joy Forehand said.

Farmington's total labor force — including the employed and unemployed - fell to 53,477 in August, down from 54,798 in July and 55,516 in August 2011.

The service sector has been hit particularly hard in the Farmington area. Employment in the service sector fell in nine of the past 10 months.

Goods-producing industries remained unchanged in the past year, providing 11,500 jobs. Local government lost 200 jobs from July to August, and 500 jobs in the previous year.

Farmington's unemployment rate has closely tracked statewide trends. The statewide unemployment rate also fell to 6.5 percent in August, down from 6.6 percent in July and 7.5 percent in August 2011.

Local Chamber of Commerce and economic development officials did not return messages Monday seeking comment.

New Mexico is in somewhat better shape than the nation as a whole. The U.S. unemployment rate was 8.1 percent in August.

Workforce Solutions noted the Navajo Agricultural Products Industry opened its flour mill in August, employing about 20 workers.