Rising U.S., euro zone joblessness hits recovery hope

By Herbert Lash and Mark John

NEW YORK/BRUSSELS (Reuters) - Unemployment surged across Europe and the United States, data showed on Thursday, with no sign of a peak as economists and officials said recovery from a deep global recession is not yet in sight.

The chief of the European Central Bank warned that while the downturn had eased, weak economic activity would hamper growth for the rest of the year and only a gradual recovery would emerge by mid-2010.

In an effort to spur economic activity, the ECB kept interest rates at 1.0 percent in the euro zone, bolstering expectations that they will stay there well into next year.

World stocks extended losses on release of the jobless figures, as investors found little evidence of a sustainable economic recovery.

Government debt prices and the U.S. dollar rose as the jobless data raised risk aversion among investors.

U.S. employers cut more jobs than expected in June, pushing the jobless rate to a 26-year peak, and unemployment in Europe rose to a 10-year high, scuttling hopes for a quick recovery.

While manufacturing data from around the world this week pointed to a bottoming of the global recession, economists said unemployment and the buying power of consumers were poised to suffer further -- an ominous sign, even for those with a job.

Much has been said about the lagging nature of unemployment reports, yet less well known is the fact that wage growth lags even more and could be pressured by inflation as wages are held steady by high unemployment.