WASHINGTON - Bloomberg
U.S. employers cut jobs for a sixth straight month and service industries shrank in June, signaling that the economic slowdown may deepen as the impact of federal tax rebates fades.
Payrolls fell by 62,000 after a 62,000 drop in May that was greater than first reported, the Labor Department said Sunday in Washington. The unemployment rate held at 5.5 percent after soaring the most in two decades in May. The Institute for Supply Management's non-manufacturing index sank to a five-month low.
Falling employment, along with record gasoline prices and tumbling home values, may cause consumers to tighten their budgets after spending the more than $100 billion of tax rebates. The longest string of payroll declines since the economy was pulling out of the last recession indicates limited scope for a Federal Reserve interest-rate increase this quarter.
�After the tax rebates are gone in another 30 days, you will see consumer spending drop back,� said Stuart Hoffman, chief U.S. economist at PNC Financial Services Group. �There will not be any employment or real wage growth to help real spending in the second half of the year.�Sunday's report showed job losses at businesses including retailers, builders, manufacturers and financial firms. The June data brought the drop in payrolls for the first half of 2008 to 438,000. Last year, gains averaged 91,000 a month. Revisions subtracted 52,000 from previously reported totals for April and May.