WASHINGTON – Nonfarm payrolls fell for the seventh straight month in July while the nation’s unemployment jumped to 5.7 percent, a four-year high, the Labor Department reported Friday.

Nonfarm payrolls fell by 51,000 last month, led by losses in manufacturing, construction, retail and temporary help.

Since December, 463,000 jobs have been lost, the strongest signal yet that the economy is in a recession.

“This is a truly recessionary employment report,” wrote Harm Bandholz, an economist for UniCredit Markets. “The details are rather ugly.”

The unemployment rate has risen 0.7 percent in the past three months, matching the fastest increases in the past 26 years.

Total hours worked in the economy fell by 0.4 of a percentage point in July and are down 0.7 percent in the past year. The average workweek fell to 33.6 hours, matching the all-time low.

Economists surveyed by MarketWatch had been looking for payrolls to shrink by 70,000 and for the unemployment rate to rise to 5.6 percent from 5.5 percent in June.

Payrolls in May and June were revised higher by 26,000.

Average hourly earnings rose as expected, adding 6 cents, or 0.3 percent, to $18.06. Average pay is up 3.4 percent in the past year, far less than the 5 percent rise in consumer prices.

“The pickup in unemployment reduces employee bargaining power, suggesting slower wage growth in the near term,” wrote Michelle Meyer, an economist for Lehman Bros. “This should relieve some of the inflation pressure but also hinder consumers.”

The number of part-time workers who sought full-time employment surged by 5.5 percent in July to 5.6 million.

The dismal news from the labor front likely won’t have much impact on policymakers at the Federal Reserve, which seems determined to stand pat on interest rates at next week’s meeting.

The Federal Open Market Committee meets on Tuesday. Analysts are unanimous in their view that the FOMC will not change its 2 percent target for overnight funds.

The Fed’s trying to balance the risks of continued economic weakness against the risk that inflation could accelerate too far. Most analysts expect the Fed to keep rates unchanged through the end of the year.

A small but vocal minority on the FOMC wants to raise interest rates soon to counter inflationary pressures. A key member of that group, Philadelphia Fed President Charles Plosser said recently that the FOMC should begin to tighten down on rates even if the unemployment rate is still rising.

The weak jobs report sparked more talk about a second stimulus package from Congress.

“Our economy continues to work its way through current challenges,” said Labor Secretary Elaine Chao. “The resiliency of the economy given all the shocks we have sustained is noteworthy.”

The loss of 666,000 private-sector jobs since November “removes any reasonable objection to a second economic stimulus package,” said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee.

On Thursday, White House economic advisers said such talk of more help from Washington was “political.”

In its July survey of business establishments, the government found that private-sector employment fell by 76,000. Goods-producing industries cut 46,000 jobs, while services cut 30,000. Manufacturing firms lost 35,000 workers, and construction firms shed 22,000 jobs.

In services, retailers cut 16,500 jobs, the eighth straight decline. Professional and business services firms cut 24,000, including 20,000 in temp help.

Health-care added 33,000 jobs. Payrolls in financial firms were flat. Government added 25,000 jobs.

Among 274 industries surveyed, 41.2 percent said they were hiring in July – the lowest in five years. Among 84 manufacturing industries, 27.4 percent were hiring in July.

According to the Labor Department’s survey of households, employment fell by 72,000 and unemployment rose by 285,000. The labor-force participation rate remained at 66.1 percent.

Unemployment among teenagers jumped by 2.2 percentage points last month, reaching 20.3 percent.

“The summertime influx of youth into the labor market was about the same as last year,” said Keith Hall, commissioner of the Bureau of Labor Statistics. “However, fewer young people were able to find jobs.”

An alternative measure of unemployment that includes people too discouraged to look for work rose to 10.3 percent from 9.9 percent, nearly matching the peak of 10.4 percent in the last downturn.

—

(c) 2008, MarketWatch.com Inc.

Visit MarketWatch on the Web at http://www.marketwatch.com

Distributed by McClatchy-Tribune Information Services.

—–

GRAPHIC (from MCT Graphics, 202-383-6064):

AP-NY-08-01-08 1736EDT

Copy the Story Link