US unemployment rises on stagnant job creation

US unemployment climbed to 9.2 percent as job creation stalled in June, official figures showed, posing new challenges to the Obama administration's efforts to rev up economic growth. A much-awaited Labor Department report showed a second month in a row of virtually no improvement, jobs-wise. The economy generated a paltry net 18,000 positions in June, after just 25,000 in May. The data, which showed 14.1 million Americans still jobless two years after the 2008-2009 recession ended, was uniformly seen as bad news for the government of President Barack Obama as Republican opponents challenge his economic record heading into elections next year. It also came as the White House and congressional leaders were locked in talks on slashing government spending, necessary to close a yawning deficit but which economists say could further curtail growth if too precipitous. "Our economy as a whole just isn't producing nearly enough jobs for everybody who's looking," Obama admitted after the jobs figures came out. "The sooner we have a plan to deal with the deficit, the sooner we give our businesses the certainty they will need in order to make additional investments to grow and hire," he said. Expected to power up the economic recovery, the private sector added just 57,000 positions last month -- compared to 241,000 in April. Offsetting that were steep layoffs by federal, state and local governments as they slash payrolls to address budget deficits. Added together, May and June paint a picture of both extremely slow growth in the economy and a reticence by businesses, many of which have been piling up cash reserves, to expand their workforces. US stock markets sank on the data, with the Dow Jones Industrial Average closing down 0.5 percent for the day. Nearly all of the new jobs came from the service sector -- and those predominantly in health care -- despite hopes of a revival in US manufacturing to drive growth. In addition, the figures showed an erosion of incomes, at a time when higher prices have already been hitting consumer spending. "It was far worse than expected, and weak on all key dimensions -- job creation, unemployment, the length of the workweek, and hourly earnings," said Nigel Gault, the chief US economist of IHS Global Insight. "We can see no silver lining in this employment report, which is weak, weak, weak," said RDQ economics. "We do not believe that the economy will drop back into recession... but this report suggests that underlying growth in the economy is probably only around two percent." Obama's chief economic advisor Austan Goolsbee labeled the data a "call to action." "Faster growth is needed to replace the jobs lost in the downturn," he said. But Republican leaders blamed Obama's economic policies for the malaise. "Another month and another disappointing jobs report; 29 straight months of 8 percent-plus unemployment," said Jeb Hensarling, chairman of the House Republican conference. "The president always tells us he inherited a bad situation. I concede the point, but he has made it worse. And after two-and-a-half years, it is time for him to take responsibility and to answer the question, 'Where are the jobs?'" Republicans competing to win their party's nomination to vie with Obama for the presidency next year also took the opportunity to hit out at him. "Today's abysmal jobs report confirms what we all know -- that President Obama has failed to get this economy moving again," thundered the field's frontrunner, former Massachusetts governor Mitt Romney. "Today’s unemployment report is another stark reminder of the failure of President Obama's economic policies," charged Republican Representative Michele Bachmann, who has surged in recent polls. Economists cut their forecasts for GDP growth for the second half of the year, though many still predict an upswing to above a three percent annual rate. "Businesses and consumers remain uncertain about the future and have responded by cutting both costs and consumption. This is not a recipe for strong economic prosperity and could lead to idle growth for the rest of year," said Jeffrey Rosen of Briefing.com.