US unemployment rate seen at 26-year high

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No hike in UK executives pay in 2009Shell slashes 5,000 jobs as profits tumbleTech job losses in US below 1%: studyUS jobless claims climb to 551,000

: Employers in the US probably cut an additional 3,65,000 jobs in June, a government report may show on Thursday, offering little evidence the Obama administration’s stimulus package is shoring up the labour market.

The payroll decline would follow a 3,45,000 drop in May, according to the median estimate of 79 economists in a Bloomberg News survey. The jobless rate likely climbed to 9.6%, the highest since 1983.

Unemployment is projected to keep rising for the rest of the year just as the income boost from the stimulus package fades, undermining prospects for a sustained rebound in household purchases, analysts said. As companies from General Motors Corp. to Kimberly-Clark Corp. cut costs, the lack of jobs will limit any recovery.

“It’s a tough labor market to be sure,” said Carl Riccadonna, a senior economist at Deutsche Bank Securities Inc. in New York. “It raises the risk of a potential double-dip in consumer spending. Rising unemployment makes it very sensitive politically.”

The labour department report is due at 8:30 am in Washington. Economists’ forecasts for payroll declines ranged from 1,50,000 to 5,00,000. Job losses peaked at 7,41,000 in January, the most since 1949.

The yield on the benchmark 10-year note has dropped since reaching a seven-month high of 3.95% on June 10 on growing concern that any economic recovery will be muted. The yield was at 3.54% late on Wednesday.

The payroll projection for June would extend the employment slump since the recession began in December 2007 to 6.3 million, the biggest loss in the post-World War II era.

Estimates for the unemployment rate ranged from 9.3% to 9.7%, compared with May’s 9.4 %. By the end of the year, unemployment will reach 10% according to the median forecast of economists surveyed last month. Unemployment will “remain painfully high for several more years,” Federal Reserve Bank of San Francisco President Janet Yellen said this week. “I expect that we will turn the growth corner sometime later this year, but I am not optimistic that the economy will spring back to normal any time soon.”

Tax cuts and Social Security payments under the stimulus plan propped up incomes last quarter, supporting household purchases. Consumer spending rose in May as earnings climbed 1.4%, the most in a year.