Town and county governments had 3,000 fewer jobs in August, and accounted for most of the public sector's 3,300-job decline.
The private sector added 6,000 jobs last month from a year earlier. But the government sector's decline cut overall employment growth to the weakest month so far in 2012.
"The numbers are worse than we had hoped for," said Shital Patel, labor-market analyst in the department's Hicksville office.
Retailing also showed significant weakness. The sector had 2,400 fewer jobs, suggesting that instead of ramping up for back-to-school sales, retailers shed jobs.
Consumers are cutting back, said Pearl Kamer, chief economist of the Long Island Association, the Island's largest business group.
"Retailers started back-to-school sales early because they expected weak consumer spending. And they got it," Kamer said.
Both the construction sector and the trade, transportation and utilities category showed the biggest year-over-year declines in the private sector, down 3,600 jobs each. That latter category includes retail.
The department uses year-over-year comparisons because the numbers aren't adjusted to reflect seasonal fluctuations.
Construction employment continues to reflect weakness in the housing market. The biggest losses in that category were in specialty trades, a bastion of blue-collar employment that had 4,500 fewer jobs in August from a year earlier.
"The blue-collar worker is really taking it on the chin," Kamer said.
The latest report showed some pockets of strength. The professional and business-services category showed the biggest increase -- 5,700 more jobs than the year before.
Valley Stream resident Melissa Curra, 23, recently got a job in business development at Sandwire Corp., a Garden City company that services computer networks. It's her first full-time job since graduating from East Carolina University last year.
Curra, who studied English and communications, wanted to work in media, but said she broadened her horizons. "I never thought I would be able to be very creative here, but I am," she said.