Economy extends job loss streak

By Alister Bull

WASHINGTON (Reuters) - U.S. employers cut workers for a sixth straight month in June for the longest such streak since 2002 and the country's vast service sector unexpectedly contracted, underscoring the economy's frailty.

The Labor Department said on Thursday that 62,000 nonfarm jobs were shed last month, bringing the number of jobs lost this year to 438,000 as a housing market crash chilled growth.

The unemployment rate, which shot up sharply in May, held steady at 5.5 percent.

A separate report showed new applications for jobless benefits hurdling to 404,000 last week, a level associated with past recessions and that suggests the labor market continued to weaken.

A separate survey showed service companies such as airlines and restaurants that make up the bulk of the economy are being pinched by soaring costs and weakening demand, and have responded by slashing staff.

"An unpleasant cocktail," said Richard Iley, senior economist at BNP Paribas in New York, summing up the data.

Shares were buffeted -- rallying on initial relief that the payrolls report was not even worse, then fading as the services survey dented enthusiasm, but ending higher as record oil prices above $145 per barrel lifted energy stocks. The Dow Jones industrial average .DJI closed up 73 points at 11,288.

Concerns about the service sector also provided a boost to short-dated U.S. government bonds, which benefit from signs of economic weakness. But longer-maturity debt prices were hurt by worries over inflation down the road. The dollar gained.