US labour market to stay in doldrums until autumn

The US labour market remained stagnant in June and unemployment drifted higher, raising the stakes on the Federal Reserve's bet that the economy's soft patch will be only temporary.

The US created just 18,000 new jobs last month, far below expectations and no significant help to the 14.1 million Americans looking for work. It follows an equally disappointing May, when 25,000 jobs were created, compared with more than 200,000 a month earlier this year.

Meanwhile, the unemployment rate ticked up one-tenth of a point to 9.2 per cent, whereas economists had predicted it would remain flat.

And there was no signal in the detail of the Labour Department's figures to suggest a build-up of demand that could shake the economy out of its funk in the coming months.

The number of temporary workers – seen as an indicator that employers are responding to extra demand before hiring full-time staff – fell in June for the third month in a row.

The Federal Reserve ended its programme of monetary stimulus last week, and predicted the recovery will resume when manufacturing supply disruptions from the Japanese tsunami abate, and when earlier fuel price rises are absorbed.

Since then, fuel prices have resumed their upward trajectory, and a new flare-up in the eurozone debt crisis has helped erode confidence in the Fed's assessment.

Kathy Bostjancic, director for macroeconomic analysis at the Conference Board, predicted a downward spiral will last at least until the autumn.

Fears of a slowdow in the pace of the US recovery are mirrored in Britain, where experts warned yesterday the construction sector performed so badly in May the second quarter of the year may have seen negative growth from the economy as a whole.

The Office for National Statistics said UK construction was just 0.4 per cent up in May, some way off forecasts – it follows a 12.4 per cent slump in April.