NEW YORK, Oct 7 (Reuters) - U.S. retailers raised their hiring in August to the highest level since December 2008, a research group said on Wednesday 7 October, indicating a slow but steady recovery in employment in the sector.

Kronos Inc, a workforce management company, said its Retail Labor Index rose slightly to 3 percent in August from 2.99 percent in July.

The index uses various metrics to analyze hirings, applications and length of service in the retail sector.

"This continued stabilization and tentative recovery in the index signals the beginning of stabilization in the overall U.S. economy and will be reflected in other measures of the economy in the coming months," said Robert Yerex, chief economist at Kronos.

The 68 retailers tapped by Kronos recorded 42,861 hirings in August -- a 2.8 percent increase from July -- representing the eighth straight monthly gain in the hiring rate.

Interestingly, the number of applications increased as well, by 2.1 percent from July. However, the increase in applications was outpaced by the increase in hirings, driving the Kronos Retail Labor Index up slightly.

The gradual rise in the Kronos Retail Labor Index indicates retailers remain cautious about the pace of retail sales as consumers continue to focus on buying essentials and seek value for money, the report said.

U.S. unemployment has risen to levels not seen since 1983 as the world's biggest economy struggles to exit a recession that began in December 2007.

(Reporting by Dhanya Skariachan; Editing by Richard Chang)