US unemployment likely to show increase in July

New York : Unemployment probably climbed in July, raising the risk American households will keep a lid on spending for the rest of the year, economists said before a government report this week.

The jobless rate rose to 9.6 per cent last month from 9.5 per cent in June, according to the median estimate of 57 economists surveyed by Bloomberg News ahead of a Labour Department report August 6. A drop in federal census workers as the population count wound down depressed payrolls for a second month, the data may show.

Both manufacturing, which led the US out of the recession, and service industries kept cooling last month, indicating the economic recovery waned at the start of the second half, other reports this week may show.

Federal Reserve Chairman Ben S. Bernanke last month said joblessness is "the most important" problem facing the economy.

"The poor job picture is the Achilles heel of the economy," said Sung Won Sohn, a professor of economics and finance at California State University-Channel Islands in Camarillo, California. "Reflecting the lackluster job market, consumers have become more cautious about spending."

Payrolls declined by 60,000 last month, depressed by the dismissal of temporary government workers helping to undertake the census, according to the survey median.

Census cuts

The Census Bureau said it let go about 144,000 of the people conducting the decennial population count from mid-June to mid-July. It still had about 200,000 temporary workers on staff as of July 17, indicating additional cuts to come that will keep distorting the payroll figures for months.

Economists say private employment, will be a better gauge of the labour market for 2010. Employment at companies rose by 90,000 after an 83,000 gain in June, according to the median forecast.

"We are getting job gains, but they just don't feel good enough," said Jonathan Basile, an economist at Credit Suisse in New York.

Joblessness, which reached a 26-year high of 10.1 per cent in October, will take time to recede as the number of previously discouraged jobseekers returning to the labour force exceeds the number of available jobs.