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Updated Monday, July 11, 2011 8:28 pm TWN, By Lucia Mutikani, Reuters

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U.S. unemployment hits 6-month high in June: report

WASHINGTON--U.S. jobs growth ground to a near halt in June as employers hired the fewest workers in nine months, frustrating hopes the economy would bounce back quickly from a slowdown in the first half of the year.

Nonfarm payrolls rose only 18,000, the Labor Department said on Friday. It was the weakest reading since September and below even the most pessimistic forecast in a Reuters poll of economists.

The dismal report, which showed the unemployment rate climbing to a six-month high of 9.2 percent, stood in stark contrast with recent data on manufacturing and retail sales that had shown activity starting to perk up.

“This report has dashed hopes that the economy was about to accelerate again,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “It is showing a much bleaker picture than other indicators and we must hope that it is overstating the extent of the slowdown.”

Investors, who had positioned for a fairly strong number after a bullish reading on private hiring from payrolls processor ADP, took a dim view of the report and sold U.S. stocks. Global equities retreated from five-week highs and oil prices slumped.

But prices for Treasury debt rallied on views the Federal Reserve would keep overnight interest rates near zero well into next year. The U.S. dollar rose against a broad basket of currencies as investors turned risk averse.

Adding to the weak tenor of the report, the department said the economy created 44,000 fewer jobs in April and May than previously thought.

Government Bleeds Jobs

Government was the biggest drag in June, but the weakness was widespread and could pressure the Fed to consider further action to help the economy. Officials, however, have set a high bar after completing a US$600 billion bond-buying program last week.

Still, economists are holding to their belief that the economy will soon pull away from its first-half soft patch and do not see a new recession on the horizon.

Joel Naroff of Naroff Economic Advisors in Holland, Pennsylvania, noted that other recent data has been more positive. “We haven't seen the economy faltering further, instead we have seen the economy coming back,” he said.

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