U.S. job losses spike in June, dampen recovery hopes

By David Lawder

WASHINGTON (Reuters) - U.S. employers cut far more jobs than expected last month and the unemployment rate hit 9.5 percent, the highest in nearly 26 years, underscoring the likelihood of a long, slow recovery from recession.

The loss of 467,000 jobs reported by the Labor Department on Thursday was 100,000 more than Wall Street economists had expected, with virtually no major economic sector spared.

Since the economy fell into recession in December 2007, 6.5 million nonfarm jobs have been lost and the unemployment rate has nearly doubled.

"It looks like the economy was still losing substantial momentum as the second quarter came to a close. This report is weak across the board," said William Sullivan, chief economist at the JVB Financial Group in Boca Raton, Florida.

Stock prices fell sharply, with the Dow Jones industrial average ending 2.6 percent lower as investors worried that the data darkened the recovery outlook. Prices for safe-haven U.S. government debt rose, pushing the yield on the benchmark 10-year note down briefly to levels not seen since late May.

The rise in the U.S. jobless rate from May's 9.4 percent took it to its highest since August 1983. In a further indication of weakness, the report showed the length of the average workweek shrank and wages were flat last month.

"The labor market is still in shambles," said economist Harm Bandholz of Unicredit Markets & Investment Banking in New York.

U.S. businesses have slashed payrolls sharply in an effort to protect their bottom line in the face of a plunge in consumer demand. Now, the deteriorating jobs market poses the biggest hurdle to a recovery that many economists expect to take root this quarter.