Unemployed Rate Hits 5.5% in July, Highest in 2 Years

The nation’s unemployment rate jumped to 5.5% in July--the highest jobless rate in two years, the government said today in a report providing mounting evidence of a weak economy.

The Labor Department said July’s 0.3 percentage point rise, up from the June jobless rate of 5.2%, put the American unemployment rate at its highest level since it hit 5.6% in August, 1988.

The sharp increase in unemployment was due largely to the economy’s loss of 219,000 jobs, the government said. Though about 160,000 of those Americans who lost jobs were temporary census workers laid off by the government, private industry payrolls also lost 45,000 jobs.

The report shows that the “economy appears to be caving in to a full-fledged recession,” said Allen Sinai, chief economist at Boston Co.

Other analysts said the unemployment data showed an economy skirting the edge of a recession.

“The economy is just hung up on a rock on the middle of the road. It’s still an economy that’s inching ahead, but at a glacial pace. . . . We’re close to the edge. It wouldn’t take much of a breeze to push us over,” said Robert Dederick, chief economist at the Northern Trust Co. of Chicago.

Janet Norwood, commissioner of the Bureau of Labor Statistics, noted that weak job growth had spread to the nation’s service sector.

That sector had been “the major engine of job growth during the current economic expansion. But that engine seems to have sputtered in July,” Norwood said.

Job losses in the private sector were largely due to the continuing deterioration in the nation’s construction and manufacturing sectors, the government said.

Many analysts were bracing for even worse unemployment news in the months ahead as the impact of a prolonged period of economic sluggishness begins to force the jobless rate higher.

Construction payrolls fell by 50,000 jobs, after seasonal adjustment, posting the fifth consecutive decline to reflect continued weakness in the housing market, the government said. The number of jobs in the construction industry is more than 100,000 below the level of last fall, the government said.

The nation’s manufacturing slump continued in July, but factory job losses were not as great as they have been in the past. Last month, factory payrolls fell by 7,000 jobs, marking the 15th time in 16 months that manufacturing jobs declined.

Since reaching a post-recession peak in March, 1989, nearly 350,000 factory jobs have been lost.