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Unemployment at 9.2 percent as jobs stall

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A second straight month of paltry job growth in June sent the unemployment rate rising to 9.2 percent, showing that the economy remained in a deep pause, the Labor Department reported Friday morning.

The meager job gain of 18,000 during the month follows a gain of only 25,000 in May after the economy registered strong growth of more than 200,000 jobs in the first four months of the year. The spring hiring freeze caused the unemployment rate to edge up from a low of 9 percent in April, but it still remains far below the 10 percent level seen during the recession.

Even the normally robust education and temporary help sectors saw layoffs last month, while health care eked out anemic growth of 14,000 jobs — about half the usual rate. Job losses continued in government, with the federal government joining state and local governments in laying off 14,000 employees.

Most of the 57,000 jobs created by the private sector last month were in leisure and hospitality businesses, which registered a gain of 34,000. Manufacturing employment ticked up only 6,000 after growing at double-digit rates earlier this year.

The weak jobs report is sure to be hugely disappointing on Wall Street, where many forecasters on Thursday had raised their predictions of jobs growth based on signs earlier in the week that the job market was on the mend. The Dow Jones Industrial Average immediately dipped by over 100 points in the first few minutes of trading in New York.

President Obama in a brief statement Friday morning said the disappointing jobs report "confirms what most Americans already know: We still have a long way to go and a lot of work to do to give people the security and the opportunity that they deserve."

"Our economy as a whole just isn't producing nearly enough jobs for everybody who's looking," Mr. Obama added.

He called again on Congress to pass legislation that would help to create jobs, such as streamlining the patent process, spending on infrastructure projects and approving pending trade deals with South Korea, Colombia and Panama.

Mr. Obama also said the jobs report underscores the importance of reaching an agreement with Congress to reduce the deficit and increase the nation's borrowing limit.

"The sooner we get this done ... the sooner that we give our businesses the certainty they need," he said.

But Republicans said the rise in the unemployment rate was a reflection of the ill effects of the president's own policies.

"Today's report is more evidence that the misguided 'stimulus' spending binge, excessive regulations, and an overwhelming national debt continue to hold back private-sector job creation in our country," House Speaker John Boehner said in a statement. "Legislation that raises taxes on small business job creators, fails to cut spending by a larger amount than a debt limit hike, or fails to restrain future spending will only make things worse — and won't pass the House

Private analysts also expressed dismay at the new report and what it means for the economy's prospects.

"The pace of growth remains below trend and is very disappointing," said John Silvia, chief economist at Wells Fargo, who was one of many economists who raised his forecast for June job growth on Thursday to 130,000. It didn't even come close to that level.

While Mr. Silvia still expects economic growth to pick up to about a 3 percent rate in the second half of the year, he noted it did not get much of a push from the economy's poor performance in June. "The second quarter ended on a weak note."

Contributing to the broad slump in the job market in June, the Labor Department said the average workweek also posted an unusual decline in June to 34.3 hours from 34.4 in May. And average hourly earnings were extremely depressed, ticking down by a penny to $22.99. Wages posted a gain of less than 2 percent in the last year.

Most of the increase in unemployment was among people who reported being out of work for only a short period of less than five weeks, the department said. The number of people out of work for six months or more was steady at 6.3 million.

"The economic recovery is simply not gaining steam," said Peter Morici, business professor at the University of Maryland. He noted that unemployment would be even higher if millions of people had not grown discouraged and simply dropped out of the job market.

"Factoring in those discouraged workers and others working part-time but would prefer full-time employment, the unemployment rate is 16 percent," he said. "Adding college graduates in low-skill positions like counter work at Starbucks, and the unemployment rate is closer to 20 percent."

"Job creation remains weak," he said, "because temporary tax cuts, stimulus spending and federal deficits do not address structural problems holding back dynamic growth."

Mr. Morici blames chronic trade deficits with China with siphoning millions of jobs from the U.S. economy, while go-slow policies on developing oil, coal and gas resources also have held back employment, he said.

"Simply, dollars sent abroad to purchase oil and consumer goods from China do not return to purchase U.S. exports, and are lost purchasing power," he said.

Many other analysts blame the economy's doldrums on the jump in gasoline prices to $4 a gallon in May. But even though pump prices have retreated dramatically in the last month to about $3.50 a gallon on average, so far that has failed to jump-start consumer spending or overall jobs and economic growth.

— David Boyer contributed to this report.

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