Thursday July 2, 08:17 PM
Weak US jobs data dashes quick recovery hopes
By Rob Lever
WASHINGTON (AFP) - Dampening hopes of an early recovery from recession, official figures Thursday showed US job losses surged to 467,000 in June, pushing the unemployment rate to a new 26-year high of 9.5 percent.
The Labor Department report, seen as one of the best indicators of economic momentum, reversed the improvement seen last month when job losses fell to a revised 322,000.
President Barack Obama called the surge in job losses "sobering," but said there were continuing signs that the "recession is slowing."
"As I've said from the moment I walked into the door, of this White House, it took years for us to get into this mess and will take us more than a few months to turn this around," the president said.
Analysts had expected a smaller June number of 365,000 job losses, but a higher unemployment rate of 9.6 percent. The jobless rate in May was 9.4 percent.
"On the whole, this was a very ugly labor market report, and there is no amount of lipstick that can improve its image," said Millan Mulraine, economic strategist at TD Securities.
"The weakening job market conditions is continuing to pour cold water on wage growth, and if anything, this will invariably keep a lid on US consumer inflation for some time."
Meny Grauman, economist at CIBC World Markets, said some analysts have gotten ahead of themselves in anticipating an economic recovery.
"This shows the recession lives on in the United States," he added.
"It's a question of the pace of decline and not recovery. The economy continues to contract at a slower pace than at the beginning of this year, but it's still a steep ride."
Since the recession began in December 2007, the world's biggest economy has lost 6.5 million jobs and the jobless rate has risen 4.6 percentage points.
"The disappointment was not just the size of the job losses but the fact that they were so widespread," noted Sal Guatieri at BMO Capital Markets.
"The outlook is still uncertain so companies are reluctant to hire even if demand is picking up."
Guatieri said the economy's troubles suggest a risk of a self-reinforcing downward spiral fed by weak demand that leads to job cuts and lower incomes, cutting consumer spending that is the lifeblood of the economy.
"This is just one month's report but if it is followed by another disappointing report in July we might have to revise our figures downward for the third quarter" for the US economy.
The report showed employment in manufacturing fell by 136,000 over the past month, boosting the total for the recession to 1.9 million job losses.
The key services sector lost 244,000 jobs including 21,000 in retail last month, the report showed.
All sectors showed job losses except education and health care, which gained 34,000 in June.
Another disappointment was that average hours worked in the private sector -- sometimes seen as a proxy for economic activity -- fell 0.8 percent in June, while overall incomes were flat.
This raised fresh fears about deflation that had ebbed in recent months.
"Today's employment report had deflation thumbprints all over it," said economist David Rosenberg at Gluskin Sheff.
Rosenberg said a broader measure of unemployment and underemployment rose to a new high of 16.5 percent.
"Ponder that number for a minute -- one in six Americans that are able and willing to work are either unemployed or underemployed at the moment," he said.
"That is certainly cause for pause, especially for the green shooters and inflation-phobes among us."
The US economy shrank at a 5.5 percent pace in the first quarter, based on the lastest official estimate, following a 6.3 percent slide in the fourth quarter of 2008 -- representing the worst slump in decades, resulting from the collapse of a housing bubble and global credit squeeze.
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