The U.S. unemployment rate rose for a third straight month in June, hiring slowed and earnings stagnated, pointing to an economy lacking momentum entering the second half of the year. The 9.2 percent jobless rate in June was the highest this year, Labor Department figures showed yesterday. Employers added 18,000 workers to payrolls, the fewest in nine months and less than the most pessimistic forecast in a Bloomberg News survey of economists. Companies may be hesitant to hire because they lack clarity on future taxes and government spending as President Barack Obama negotiates budget cuts with Congress and the U.S. reaches the limit of its borrowing authority. Stocks fell yesterday as the report called into question Federal Reserve projections the economy will improve during the remainder of the year. “Businesses are back to being super cautious again,” said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Massachusetts. “They’re still very worried about how this debt ceiling thing gets resolved.” Obama yesterday said Congress can quickly help create jobs by extending a payroll tax cut, hiring construction workers for infrastructure projects, approving pending trade agreements and passing a measure to streamline patent procedures. Speaking at the White House in Washington, Obama said the report shows “we still have a long way to go and a lot of work to do to give people the security and opportunity they deserve.” Debt Ceiling Obama and eight congressional leaders from both parties will try again tomorrow to find a compromise on cutting deficits and raising the $14.3 trillion borrowing limit. “The sooner that the markets know that the debt limit ceiling will have been raised and that we have a serious plan to deal with our debt and deficit, the sooner that we give our businesses the certainty that they will need” to hire, Obama said. House Speaker John Boehner, an Ohio Republican, said a “misguided” $814 billion stimulus package, combined with business regulations and a mounting national debt “continue to hold back private-sector job creation in our country.” The Standard & Poor’s 500 Index declined 0.7 percent to 1,343.8 at the 4 p.m. close yesterday in New York. The yield on the benchmark 10-year note dropped to 3.02 percent from 3.14 percent a day earlier. Economists’ Forecasts The increase in payrolls compared with a median forecast of 105,000 in the Bloomberg survey. Estimates of 85 economists ranged from increases of 40,000 to 175,000. The unemployment rate was forecast to hold at 9.1 percent. “We still believe that a number of temporary factors point to a pickup in GDP growth during the second half of 2011,” David Greenlaw, chief financial economist at Morgan Stanley, said in a note to clients. “But the extent of that improvement now seems likely to be somewhat less than previously thought given the fading support for income and production evident in the jobs figures.” Fed officials have said the slowdown in economic growth in the first and second quarters partly reflected temporary developments. Manufacturers were hurt by supply disruptions in the aftermath of the earthquake in Japan, while a surge in gasoline expenses limited spending by American consumers on other items. ‘Improving Slowly’ “The labor market is improving slowly,” Jenny Lin, senior U.S. economist at Ford Motor Co., said on a teleconference with analysts on July 1. The temporary restraints on the economy “are reversing now and set the stage for some improved readings in the months ahead.” Billionaire Warren Buffett said he is wagering on continued economic expansion and “would bet very heavily against” a second recession. Even so, “how fast the recovery will come, I don’t know,” Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., told Bloomberg Television’s Betty Liu on the “In the Loop” program yesterday. Unemployment rose even as the labor force participation rate, the percentage of working age population either working or looking for a job, declined to 64.1 percent, the lowest since March 1984. Private hiring, which excludes government agencies, rose 57,000 last month, the smallest gain since May 2010. Government payrolls declined for an eighth straight month, and construction jobs fell. Factory payrolls climbed 6,000 in June, while the gain at service-providers was the smallest since September. Average hourly earnings dropped 1 cent to $22.99, while the average work week for all workers decreased to 34.3 hours. The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 16.2 percent, the highest this year. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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