Unemployment: 9.5%; payroll job loss greater than expected

WASHINGTON -- Employers cut a larger-than-expected 467,000 jobs in June, driving the unemployment rate up to a 26-year high 9.5%, according to the Labor Department.

The report showed that even as the recession shows signs of easing, companies likely will want to keep a lid on costs and be wary of hiring until they feel certain the economy is on a solid ground.

June's payroll cuts were deeper than the 363,000 economists expected.

However, the rise in the unemployment rate from 9.4% in May wasn't as sharp as the expected 9.6%. Many economists predict the jobless rate will hit 10% this year, and keep rising into next year, before falling back.

All told, 14.7 million people were unemployed in June.

If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 16.5% in June, highest on records dating to 1994.

Yet even with the high pace of job cuts in June, the report indicates the worst of the layoffs may have passed. The deepest job cuts of the recession came in January, when 741,000 jobs vanished, most in any month since 1949.

"We were on the road of things getting less bad in the jobs market, and that has been temporarily waylaid," said economist Ken Mayland, president of ClearView Economics. "But this doesn't change my view that the recession will end later this year. We're probably two months away."

In a separate report, the Labor Department said the number of newly laid-off workers filing applications for unemployment benefits fell last week to 614,000, in line with economists' predictions. The number of people continuing to draw benefits unexpectedly dropped to 6.7 million.

The Commerce Department also offered some upbeat news Thursday with the release of a report showing orders to factories jumped in May by the largest amount in nearly a year. Total orders rose 1.2% in May, better than the 0.8% increase that economists had expected.

Still, job losses last month were widespread.

Professional and business services slashed 118,000 jobs, more than double the 48,000 cut in May. Manufacturers cut 136,000, down from 156,000 the previous month. Construction companies shed 79,000 jobs, up from 48,000. Retailers eliminated 21,000, up from 17,600. Financial firms cut 27,000, after shedding 30,000 in May. The government cut 52,000 jobs, up from 10,000 the previous month. Leisure and hospitality cut 18,000 jobs, erasing a gain of the same size in May.

The few industries adding jobs included education and health services, which added 34,000 last month and 47,000 in May.

With the weakness in the job market, workers didn't see any wage gains in June. Average hourly earnings were flat at $18.53.

Since the recession began in December 2007, the economy has lost a net of 6.5 million jobs.

As the downturn bites into sales and profits, companies have turned to layoffs and other cost-cutting measures to survive. Those include holding down workers' hours and freezing or cutting pay.

The average work week in June fell to 33 hours, lowest on records dating to 1964.

Recoveries after financial crises tend to be slow, which is why economists predict it will take years for the job market to return to normal. Some predict the nation's unemployment rate won't drop to 5% until 2013.