US unemployment rate falls to 9.5 percent

July 2, 2010
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, WASHINGTON, July 2 – The US unemployment rate fell to 9.5 percent in June as thousands of Americans left the workforce, adding to pessimism about the health of the economic recovery.

The economy lost jobs for the first time since December, the Labor Department said Friday, with 125,000 posts disappearing last month.

The unemployment rate fell from 9.7 percent in May, a figure that likely will offer little succor to President Barack Obama, who is running out of time to put the economy back on track before congressional elections in November.

The White House has repeatedly warned that unemployment will remain high for the rest of the year, while polls show it is a crucial issue with voters.

Most analysts had expected the ranks of jobless Americans to have swollen beyond 15 million, pushing the unemployment rate from 9.7 percent to 9.8 percent.

In the end the number of unemployed fell to 14.6 million in June as hundreds of thousands of Americans left the job market and 21,000 people took up temporary posts.

But the loss of 125,000 jobs will add to worries that the economic path ahead will be bumpy.

The drop proved to be a Rorschach test for Wall Street investors, with some seeing the report as evidence that a slow recovery is underway and others as an ominous sign of problems ahead.

In recent weeks markets have been convulsed by worry about a double-dip recession.

The last quarter has been tortuous for the top 30 US companies, with the Dow Jones Industrial Average losing more than 10 percent of its value, in large part over fears about the fate of the US economy.

The biggest cause for concern had been the continued weakness of the private sector, which created a modest 83,000 jobs in June, although that figure was well up from May\’s downwardly revised total of 33,000.

Faced with an uncertain outlook and poor access to credit, US firms have been reluctant to rehire workers.

But not everyone was gloomy.

"Despite the slightly larger drop in payroll numbers, there were some positive signs in this report," said Jason Schenker of Prestige Economics.

"A recovery is clearly underway, although it will be a slow one for the job market," said Schenker.

The June figures showed the evaporation of hiring for the 2010 Census, which had accounted for around 95 percent of new jobs in May.

Census hiring fell back by 225,000.

The continued weakness of the private sector has sparked calls for Obama to provide more government spending to restart the recovery.

But proponents of such a plan admit it will be nearly impossible as Washington zeroes in on elections in which the national debt is also likely to feature prominently.

Congress is currently locked in a bitter debate over extending unemployment insurance for over one million workers and is likely to balk at a wider spending package.

"The private sector is not yet poised to takeover and sustain a robust recovery," said Heidi Shierholz of the Economic Policy Institute, a Washington-based think tank.

With state governments cutting jobs to balance their books, Shierholz said there was a strong case for extending unemployment benefits and aid to states, despite the political difficulties.

"This is one of those cases where the political realities are completely at odds with economic sense," she said advocating fresh stimulus of around 400 billion dollars.

"I don\’t know what is going on in the heads of these people, the economic case is so cut and dry, it is so clear what needs to be done."

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