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U.S. job losses spike in June, dampen recovery hopes
WASHINGTON (Reuters) - U.S. employers cut far more jobs than expected last month and the unemployment rate hit 9.5 percent, the highest in nearly 26 years, underscoring the likelihood of a long, slow recovery from recession.
The loss of 467,000 jobs reported by the Labor Department on Thursday was 100,000 more than Wall Street economists had expected, with virtually no major economic sector spared.
Since the economy fell into recession in December 2007, 6.5 million nonfarm jobs have been lost and the unemployment rate has nearly doubled.
"It looks like the economy was still losing substantial momentum as the second quarter came to a close. This report is weak across the board," said William Sullivan, chief economist at the JVB Financial Group in Boca Raton, Florida.
Stock prices fell sharply, with the Dow Jones industrial average ending 2.6 percent lower as investors worried that the data darkened the recovery outlook. Prices for safe-haven U.S. government debt rose, pushing the yield on the benchmark 10-year note down briefly to levels not seen since late May.
The rise in the U.S. jobless rate from May's 9.4 percent took it to its highest since August 1983. In a further indication of weakness, the report showed the length of the average workweek shrank and wages were flat last month.
"The labor market is still in shambles," said economist Harm Bandholz of Unicredit Markets & Investment Banking in New York.
U.S. businesses have slashed payrolls sharply in an effort to protect their bottom line in the face of a plunge in consumer demand. Now, the deteriorating jobs market poses the biggest hurdle to a recovery that many economists expect to take root this quarter.
President Barack Obama said the June jobs report was "less devastating" than monthly losses in the first quarter, but added that was little comfort to millions of Americans suffering from unemployment.
"It took years for us to get into this mess and it will take more than a few months to turn it around," Obama said at the White House.
Monthly U.S. job losses peaked in January at 741,000 and had decreased each month since then until June, an indication that the pace of the economy's deterioration had been slowing.
The Labor Department revised figures for April and May to show a net 8,000 fewer jobs were lost in those months than previously reported. The May job losses were revised downward to 322,000, while April losses were revised upward to 519,000.
Data in Europe on Thursday also showed unemployment in the 16-nation euro zone rose to a 10-year high of 9.5 percent in May, adding to concerns about demand for U.S. exports.
SIGNS OF HOPE
A separate report, however, offered some hope that pressure on the labor market was starting to fade.
The Labor Department said first-time claims for state unemployment insurance benefits fell last week.
In addition, the number of people still on jobless aid rolls after claiming an initial week of benefits dropped to just over 6.7 million in the week ended June 20, only the third week this year that continued claims dropped.
Many economists have predicted that the unemployment rate will continue to rise even if recovery takes hold this year. But Chris Rupkey, chief financial economist at Bank of Tokyo/ Mitsubishi UFJ in New York, said in a research note that if current trends hold, "the odds are increasing that the unemployment rate has peaked for this recession at 9.5 percent."
While June's job losses were widespread, the steepest decline was in services, the backbone sector for the U.S. economy, where payrolls shrank by 244,000 positions after a 107,000 drop in May. Construction lost 79,000 job slots and government employment fell by 52,000.
Manufacturing was one of the few areas to show a smaller drop in June, down 136,000 after a 156,000 fall in May.
A separate government report on Thursday showed orders for U.S. manufactured goods in May rose 1.2 percent, the largest increase in nearly a year.
Still, it was the ninth straight month that more than 100,000 jobs were lost in that sector.
The median time all individuals were out of a job grew to 17.9 weeks in June, the longest on records dating to 1967.
The weak labor market also continued to undercut real wages. Average hourly earnings in June were flat with May at $18.53 an hour, while the length of the average workweek fell to 33.0 hours from 33.1 in May, pressuring consumer incomes.
Over the past year, average weekly hours have risen just 2.7 percent, the smallest 12-month change since the period ended September 2005.
(Additional reporting by John Parry in New York and Emily Kaiser in Washington; Editing by James Dalgleish)
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