US jobless rate hits 5-year high

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WASHINGTON, Sept 6 (Reuters) An unexpectedly steep 84,000 US jobs were lost in August and the national unemployment rate hit a five-year high of 6.1 per cent, fanning worry ahead of November's presidential vote about rising recession risks.brThe eighth straight month of job cuts underlined the weakening state of labour markets and prompted back-and-forth jibes by Democratic presidential contender Sen Barack Obama and Republican nominee Sen John McCain about how to help.brMcCain called for more job training while Obama said tax cuts for working families and aid for states was needed. The Bush administration insisted the economy was fundamentally sound and that an additional stimulus program was not needed.brA total 605,000 employees have been slashed from payrolls so far this year-nearly a quarter million in the last three months alone-which private-sector analysts said clearly implies a heightened risk of an economic contraction.brAccording to our estimates, the sharp rise in the unemployment rate over the past six months translates into a recession probability of 70 per cent, which is higher than in 1990-91 and 2001, said Harm Bandholz of UniCredit Markets in New York, referring to the two most recent recessions. brThe speaker of the US House of Representatives, California Democrat Nancy Pelosi, renewed a pledge to seek a second economic stimulus program to pick up from one earlier in the year that has now largely been paid out to consumers.brThe intently watched Labour Department jobs report caught financial markets by surprise because the losses were above expectations and June and July cuts each were revised up. The department said a total 58,000 more jobs were lost in June and July than it had previously thought.brStock prices initially fell but largely recovered by the close of trading because of bargain-hunting for beaten-down shares of financial companies. The Dow Jones industrial average ended up 32.73 points at 11,220.96 while the high tech-laden Nasdaq Composite Index was off 3.16 points, at 2,255.88.brThe dollar similarly fell in early trading but edged higher against the euro later in the day. Short-term interest rate futures, which little more than a month ago signaled a Fed rate hike was likely by year-end, shifted to suggest a small chance the central bank could lower borrowing costs this year.brAnalysts said the bleak hiring data likely means that Federal Reserve policy-makers will feel obliged to keep interest rates low for an extended period.brThe economy is clearly deteriorating, said Gary Thayer, senior economist for Wachovia Securities in St Louis. We're also seeing weakness around the globe so there's less reason for the Fed to focus on inflation and more reason to focus on getting the economy back on its feet. brAugust's 6.1 per cent unemployment rate was up sharply from 5.7 per cent in July and was the highest since September 2003.brAnalysts said past experience shows that a continuing economic decline could drive the unemployment rate higher and keep it there for some time.brUnemployment peaked at 7.8 per cent in 1992 and I certainly think we could get back to those levels, said Mark Vitner, senior economist at Wachovia, who said US domestic final demand was at its weakest level since the early 1990s.