US unemployment rate breaches six per cent for the first time in five years

Not only are home foreclosures at a record high in the US, but national unemployment also climbed above the psychologically important 6 percent level last month for the first time in five years - and it's likely to go even higher in the months ahead, possibly throwing the economy into a tailspin as Americans pick a new president. The rate has steadily climbed this year from a cycle low of 4.4 per cent and now sits just below the peak of 6.3 per cent seen during the last recession. (See: Home foreclosures at record high in the US)

The nation's unemployment report, released yesterday, had a major impact on financial markets. The dollar weakened in foreign-exchange trading, while stocks dropped sharply after the data were released but showed signs of a rebound by midday.

The factory sector, especially the auto industry, shed jobs in August. Employment services, considered a bellwether of future labour-market trends, also had sharp losses. Payroll losses in the previous two months were 58,000 larger than previously estimated.

Aggregate hours fell 0.1 per cent in August, the fifth straight monthly decline. Hours worked in the factory sector plunged 0.9 per cent. The jobless rate rose for a clear-cut reason: People lost jobs.

According to a separate survey of households, employment fell to 145.6 million, off 342,000. Unemployment rose by 592,000, to 9.4 million, and the labor force fell by 8,000 in August.

Average hourly earnings increased a larger-than-expected 7 cents, or 0.4 per cent, bringing the year-over-year gain to 3.6 per cent. Higher wages could fuel inflation, Fed officials fear, but so far wages have remained tame.

There were job losses across the private sector, as only government and education and health care added workers. Factory payroll losses accelerated, dropping by 61,000, their eighth straight monthly decline. Construction jobs fell by 8,000 in August. Both of these sectors haven't experienced job gains in more than a year.

So far this year, a staggering 605,000 jobs have vanished - slightly less than the population of Alaska. The economy needs to generate more than 100,000 new jobs a month for employment to remain stable.

According to the payroll survey of business establishments, private-sector payrolls fell by 67,000, twice the 33,000 estimated by the ADP national employment report Wednesday.

Service-producing industries lost 27,000 jobs, with losses seen in retail, transportation and financial services. Temporary-help jobs fell by 37,000. (See: US unemployment at four-year high)

By historical standards, the country is far from the employment carnage seen more than two decades ago, when unemployment climbed above 10 per cent during President Reagan's first term in the early 1980s.

Still, some groups are being hit harder than others. The jobless rate for blacks jumped to 10.6 per cent last month, the highest since late 2005. And, the unemployment rate for Hispanics rose to 8 per cent, a five-year high.

Presidential candidates Barack Obama and John McCain seized on the job figures to attack each other's proposals to turn the economy around.

"The working men and women I meet every day are working harder for less," Obama said. He advocates tax cuts for working families and investment in road, bridges and other projects to lift the economy.

McCain vowed to "fight for those that lost their jobs, savings and real-estate investments." He said tax reductions for people and businesses, job training and measures to promote trade will help ease the economic woes.

The Presidential office also expressed disappointment. "There is no question that the labor market is not as strong as we'd like," said press secretary Dana Perino. "We want to see the economy return to job growth, and we understand that this is a difficult time for many Americans. We want everyone who wants to work to be able to find a job."