NEW YORK (CNN/Money) - The unemployment rate edged up to 5.9 percent in June, the government said Friday, as the labor market struggled to recover from a recession that led to more than a million job cuts in 2001.

The unemployment rate was 5.8 percent in May. Employers added 36,000 jobs to payrolls in June, the Labor Department reported, compared with a revised 24,000 gain in May, fewer than originally reported for that month. Economists surveyed by Briefing.com had forecast an unemployment rate of 5.9 percent and 75,000 new jobs in June.

"This report is clearly disappointing," Wells Fargo Chief Economist Sung Won Sohn said in a research note, citing businesses' reluctance to hire amid the weak stock market and the economic slowdown. Sohn added that the recent layoff announcements by WorldCom and EDS will worsen the employment picture in the coming months.

"The jobless rate will continue to rise, peaking around 6.3 to 6.5 percent later this summer. The Federal Reserve won't even think about hiking the interest rate until the unemployment rate crests," Sohn said.

But there are some hopeful signs, he added. More jobs are being created, though at a slow pace, and job losses in manufacturing, which has been in a long-running slump, are easing off.

On Wall Street, stocks soared in a so-called relief rally after there were no major terrorist attacks over the Independence Day holiday, when financial markets were closed in the United States. The jobs report had relatively little effect on stocks, investors said.

While the jobs report pointed to a sluggish labor market, the underlying trend of economic recovery appears intact, some economists said.

"The overall trend is that we're making progress," said Anthony Chan, chief economist at Banc One Investment Advisors.

"There's no question the recovery is taking longer than people thought. People thought the economy would pick up very quickly and that we would have a typical garden variety economic recovery. That's not the case, but the good news is it is a recovery. You can't ask for more than that."

The sluggish economic recovery and the rising unemployment rate have already pinched consumers, whose spending fuels two-thirds of the nation's economy. Friday's unemployment number is likely to keep consumer cautious, economists said.

Banc One's Chan said that in spite of some encouraging signs in the report, such as an increase in the work week and a rise in temporary employment, unemployment may not decline until the early part or middle of next year. Such a sluggish recovery is likely to prompt the Fed, the nation's central bank, to put off any interest rate changes for the rest of the year.

"I think the numbers minimize the probability of any action this year," Chan said.

Unemployment rose last year as companies cut about 1.5 million jobs during a recession that began in March 2001. It hit 5.8 percent last December and has been at or near that number ever since.

Unemployment often rises early in an economic rebound because companies are reluctant to hire new workers until they're sure the recovery is real and their profits will rise. But this time around, unemployment seems to be lagging more than some economists and policy-makers had hoped.

Despite the weakness in the job market, consumer spending has held up fairly well, buoyed by falling interest rates and a boom in mortgage refinancing, which has helped put extra cash into the pockets of millions of Americans.

But the broader economy may not pick up steam until the slump in business spending ends. The corporate spending spree of the 1990s on new technology and factory improvements crashed in 2000, helping bring in the recession that started last year.

In a bid to fuel growth, the Fed cut rates 11 times in 2001, a record for a calendar year, but the central bank's policy-makers have held rates steady at four meetings so far this year, and more and more economists think the Fed will leave rates alone for some time.

In its report, the department said the retail sector lost about 18,000 jobs in the month, while manufacturing lost 23,000 jobs, much lower than its losses last year. But the service sector gained 33,000 while government payrolls climbed by 23,000.

The average work week edged up to 34.3 hours from 34.2 and average hourly wages added 6 cents to $14.76.