Jobless rate climbs as 51,000 jobs vanish

WASHINGTON -- Stores, factories and other businesses large and small showed workers the door last month, sending unemployment to its highest rate in four years and adding to the evidence an economic recovery remains far off.

Employers clamped down on hiring and cut 51,000 jobs in July, the Labor Department said Friday. The economy has shed jobs each month this year -- 463,000 in all.

The unemployment rate rose to 5.7 percent, up from 5.5 percent in June.

The jobs report contributed to another day of grim news for the economy. General Motors reported a quarterly loss of more than $15 billion and said its sales fell by more than a quarter from last year.

The Commerce Department said spending on construction projects around the country dropped 0.4 percent in June as cutbacks in home building eclipsed gains in commercial construction.

And manufacturers' business was flat in July. The Institute for Supply Management's reading of activity from the producers of cars, airplanes, appliances and other goods hit 50, down from 50.2 in June. A reading above 50 signals growth.

Job losses in July were the heaviest in industries hard hit by the slow housing market, the clampdown on credit and the shaky financial sector. Manufacturers cut 35,000 jobs, construction companies 22,000 and retailers 17,000.

Temporary help firms, also viewed as a barometer of demand for future hiring, eliminated 29,000 jobs. Those losses swamped job gains elsewhere, including in the government, education and health care.

It's not news to B.B. Hooks, 40, who was laid off in May from her job as a teacher in Washington, D.C. She said she's applied online for hundreds of jobs in the communications and public relations fields, with no luck.

She applies for jobs online to save on gas, but it's harder to talk to potential employers face-to-face, and she has to register at each company's Web site.

"I must have a trillion different passwords for a trillion different Web sites," she said.

More pink slips are expected. Analysts predict a half-million more jobs could disappear over the rest of this year and say unemployment could climb to 6.5 percent by the middle of next year.

With the employment situation deteriorating, there's growing worry that consumers will cut back on spending later this year, further hurting the economy.

"People will absolutely shut off the spending spigots given the soured jobs market," predicted Richard Yamarone, economist at Argus Research. "The economic environment is in crummy shape."

On Wall Street, stocks slumped. The Dow Jones industrials fell 51.70 points to close at 11,326.32.

Capitol Hill Democrats renewed their push for a second stimulus package. The Bush administration and other Republicans have been cool to the idea.

The White House was "displeased" with the jobs report, press secretary Dana Perino said. She said the White House was "working to improve the job outlook for our economy."

With the economy a top concern for voters, the presidential candidates, Republican John McCain and Democrat Barack Obama, seized on the jobs figure and traded swipes at their proposals to turn things around.

"With job losses mounting, prices rising, increased turbulence in our financial system and a growing credit crunch, we need to do more," said Obama.

He called for a $1,000 emergency rebate for Americans to offset soaring energy costs. "We cannot afford four more years of the failed Bush economic policies and that is what Sen. McCain if offering," Obama said.

McCain said Obama's tax plan will send jobs overseas. He supports proposals to help small businesses create jobs. "Americans are hurting and today's job numbers are just the latest reminder of the economic challenges we face," he said.

The increase in the unemployment rate in July came as many young people streamed into the labor market looking for summer jobs. Fewer of them were able to find work. The unemployment rate for teenagers jumped to 20.3 percent, the highest since 1992.

Still, the job losses were not as some fears. Economists were expecting 72,000 jobs lost for July. The government also revised the job-loss figures for May and June to a combined 98,000, down from 124,000.

All told, there were 8.8 million people unemployed in July, up from 7.1 million last year. The jobless rate last July was a full percentage point below where it was this July.

Wages went up modestly last month, but prices have been rising faster. Average hourly earnings rose to $18.06, up about 3 percent from last year. High food and fuel costs mean paychecks aren't stretching as far, though.

"It's easy to see why consumer spending is expected to remain weak through the summer, if not the rest of the year," said Bernard Baumohl, managing director and chief economist at The Economic Outlook Group.

The Federal Reserve is expected to hold interest rates steady next week as it tries to grapple with dueling concerns -- a weak economy and inflation.

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AP Business Writer Christopher S. Rugaber contributed to this report.