The nation's unemployment rate made an unexpected leap in June to 6.4 percent, its highest level in more than nine years and a sign that the economy isn't rebounding as fast as many economists expected.
Companies slashed 30,000 jobs from their payrolls last month, pushing the unemployment rate up from 6.1 percent in May.
It was the biggest month-to-month increase in people without jobs since the period after the Sept. 11, 2001, terrorist attacks and helped to increase the number of unemployed to 9.4 million from 9 million the month before.
"Taken at face value, I think it means that overall the labor market is still sluggish," said Alan Levenson, chief economist for T. Rowe Price.
Since March, U.S. unemployment has increased by 913,000. Last month, 2 million people had been unemployed for 27 weeks or more, an increase of 410,000 since January.
Maryland employment figures for May, also released yesterday, painted a somewhat brighter picture for the state, which did better than the rest of the country, in part because of its proximity to Washington.
Maryland unemployment rose slightly, from 4.1 percent in April to 4.2 percent in May. The numbers are not seasonally adjusted and are a month behind the national figures.
"Unemployment has been on an upward trend here and nationally, but primarily because of the federal government and certain helpful demographic factors, the erosion of the labor market in Maryland has not been nearly as severe as it has been nationally," said Anirban Basu, head of Optimal Solutions Group, a Fells Point-based economic and policy consulting firm.
The national unemployment figures surprised many economists, whose consensus forecast was for a more modest increase to 6.2 percent. But the economists said they still think the economy is improving, albeit more slowly than they had predicted.
"I was disappointed; I don't like to be wrong," said David Resler, chief economist with Nomura Securities International in New York. "We're not generating the kind of rebound that I would have expected, at least not the breadth of it. But we do have topics of improvement."
Construction employment, helped by a strong housing market, rose for the fourth straight month. Since February, 101,000 construction jobs have been created. The health care, temporary employment and hospitality industries also gained jobs.
Manufacturing continued to suffer, as industry slashed 56,000 jobs last month. About 2.6 million people have been laid off from manufacturing jobs since July 2000.
Ken Mayland, an economist at Clearview Economics in Pepper Pike, Ohio, said unemployment numbers may have been elevated by workers who had become disenchanted and stopped looking for jobs so weren't counted in unemployment figures in previous months but have been drawn back into the labor market by signs of an improving economy. More than 600,000 people resumed their search for work last month.
Companies are still cautious about hiring permanent employees, although they are taking on temporary workers, who are less costly to lay off. The number of temporary workers increased by 38,000 last month.
"Companies are simply unwilling to hire on the concept of there being a recovery," Mayland said. "Before firms rehire, there has to be tangible facts reflected by higher productivity and higher sales.
"The economy is mired in a chicken-or-egg paradigm of what comes first," he said. "Are jobs necessary to spur new spending, or is fresh new spending necessary to create new jobs?"
Many economists predict that the economy will pick up in the second half of the year because of the Federal Reserve's interest rate cuts and President Bush's tax-cut package. They noted that the labor market is one of the last things to recover during an economic rebound.
The stock markets gained this week, though profits fell after the release of the employment numbers.
"This doesn't cause me to throw in the towel yet, but it does show me we have some hurdles to overcome," Resler said.
Along with access to federal government jobs, Basu said, Maryland has a well-educated population and little manufacturing, so it has been less affected by the sluggish economy.
Several Maryland counties posted unemployment numbers that were better than the national figures. The Baltimore region posted a 4.8 percent unemployment rate in May. Montgomery County had the state's lowest rate, at 2.5 percent, and Dorchester on the Eastern Shore had the highest at 10.2 percent.
Baltimore's unemployment rate in May was 7.9 percent, Anne Arundel County's was 3.4 percent, Harford County's was 4.4 percent, and Howard and Carroll counties reported 2.8 percent rates.