A Reuters survey of eight analysts had forecast an August jobless rate on the rise at 7.7%.

ISTAT revised down July's rate to 7.5% from a previously reported 7.6% and also lowered the previous two months' data.

August's surprisingly strong jobs report comes despite a marked slowdown in the economy and marks a rebound from a negative reading for July, when ISTAT had reported 73,000 job losses.

In the three months to August, employment was up by 129,000, or 0.5%, compared with the March-to-May period, ISTAT said.

Compared with August 2022, the number of employed was up by 523,000 or 2.3%.

In August, the youth unemployment rate, measuring job-seekers between 15 and 24 years old, was broadly stable at 22.0% versus 22.1% the month before.

Italy's overall employment rate, one of the lowest in the euro zone, edged up in August to 61.5% from 61.4%.

The Italian economy shrank 0.4% in the second quarter from the previous three months and most analysts expect activity to remain weak over the near term, partly to the recent rise in interest rates.

The government on Wednesday lowered its forecast for 2023 gross domestic product growth to 0.8% from 1%, following the buoyant 3.7% growth seen last year.

It cut next year's growth forecast to 1.2% from a 1.5% forecast made in April.

ISTAT gave the following data:

AUG JULY JUNE MAY JOBLESS RATE 7.3 7.5r 7.4r 7.6r

YOUTH UNEMPLOYMENT RATE (15-24) 22.0 22.1 22.2 22.9r

EMPLOYMENT RATE (15-64) 61.5 61.4r 61.5 61.3

r=revised

((Reporting by Gavin Jones)((gavin.jones@reuters.com))