Unexpected surge in US jobless takes unemployment rate to 9.5%

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The Independent Online

Unemployment is accelerating again in the world's largest economy, confounding forecasters who believed that the pain of the US recession was starting to ease.

The economy shed 467,000 jobs in June, compared with the 322,000 lost the previous month, as business in manufacturing and the service sector continued to shrink and the federal government also reduced its headcount.

The unemployment rate, meanwhile, inched nearer to double figures, to 9.5 per cent, its worst level in 26 years.

"The headline payroll number was awful and quite a bit worse than expectations," said Ian Morris, the head of US economics at HSBC. "The euphoria over last month's smaller than expected job loss has now been well and truly dashed. We still think the official recession is or near an end, but as we have been warning, the next phase is the jobless recovery."

The White House said it expected improvements in the employment situation to lag any economic rebound, and that monthly figures will be volatile for some time. "We have successfully stabilised the financial markets," President Barack Obama said yesterday, "and started to see some stabilisation on housing, but what we are still seeing is too many jobs lost."

By lunchtime in New York, the US stock market was trading down more than 2 per cent on the disappointing news, which traders said strengthened the hand of economists who fear a "double-dip" recession. Until unemployment eases, there is likely to be downward pressure on consumer spending, which still accounts for two-thirds of US economic activity.

However, there were some positive data yesterday, including a separate report on the labour market, which showed that first-time claims for state unemployment benefit fell to 614,000 in the week ended 27 June, from 630,000 the previous week. And the number of people still on jobless aid after their first week fell to just over 6.70 million from 6.76 million, only the third week this year that the "continuing claims" figure has dropped.