Job market takes turn for worse

Employers cut more jobs than expected in June and unemployment rate climbed for the ninth straight month, hitting 9.5%.

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By Chris Isidore, senior writer


NEW YORK ( -- The battered U.S. labor market took a step backwards last month as employers trimmed more jobs from their payrolls in June, according to a government report Thursday.

There was a net loss of 467,000 jobs in June, compared with a revised loss of 322,000 jobs in May. This was the first time in four months that the number of jobs lost rose from the prior month.

The June job losses were also far worse than the forecast of a loss of 365,000 jobs by economists surveyed by

The unemployment rate rose for the ninth straight month, climbing to 9.5% from 9.4%, and hitting another 26-year high. Economists had been expecting that the unemployment rate would hit 9.6%.

Nearly 3.4 million jobs have been lost during the first half of 2009, more than the 3.1 million lost in all of 2008.

"It's not the catastrophic numbers we saw earlier this year, but they're still pretty damn lousy," said Keith Hembre, chief economist with First American Funds.

The job losses don't tell the full picture of the pain the labor market either. The average hourly work week fell to 33 hours from 33.1 hours in May, a record low in readings that go back to 1964. Average hourly wages were unchanged, so the shorter week shaved $1.85, or 0.3%, off of the average weekly paycheck.

The so-called underemployment rate, which counts those who are working part-time jobs because they couldn't find a full-time position as well as discouraged job seekers who have stopped looking for work, rose to a record high 16.5%.

Those who have been out of work for six months or more, many who have run out of unemployment benefits, climbed to nearly 4.4 million, also a record high.

Jared Bernstein, the chief economic advisor to Vice President Biden, said the latest figures are disappointing to the administration.

"Less bad is not what we're shooting for," he told

But Bernstein added that the $787 billion economic stimulus package passed by Congress earlier this year has yet to have its full impact on the labor market.

"There's a lot more to go," he said. "We have to let this medicine get into the patient, let this economic activity have the job creation effects we know [are] coming."

Tig Gilliam, CEO of Adecco Group North America, a unit of the world's largest employment staffing firm, said he's concerned about continued sluggish spending by consumers, which will delay any hopes for an economic recovery.

"The 90.5% who have jobs aren't spending," said Gilliam.

But Robert Brusca of FAO Economics said the hopes for a turnaround that accompanied the previous jobs report should not be completely wiped out by the weak June report.

"It's a disappointing month but the trends are still quite positive on the whole," he said, pointing to the smaller rise in unemployment and a three-month average of job losses that continues to slow.

How high will the unemployment rate go?

Others said they see little hope for a quick turnaround in hiring or unemployment.

"The green shoots in the job market are hard to find," said Sung Won Sohn, economics professor at Cal State University Channel Islands. "Businesses are determined to trim costs by cutting payrolls. Employers want to make sure that a sustained economic recovery is here before hiring. The job market will become the Achilles' heel of the coming recovery."

Gilliam, Hembre and Sohn all predicted that the unemployment rate will be above 10% by the end of this year. Brusca thinks it could top out at 9.8%, but wouldn't rule out a 10% reading.

In addition to the continued job losses driving the rate higher, any signs of improvement in the economy can actually boost the unemployment rate. That's because discouraged job seekers no longer counted as unemployed return to the labor force looking for work.

"Some of the rise in unemployment towards the end of the cycle is good news," said Brusca.

The only good news reported by the Labor Department Thursday was that the number of workers filing initial jobless claims fell to 614,000 last week from 630,000 the week before. That was roughly in line with forecasts. To top of page

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