U.S. employers cut 51,000 jobs last month, boosting the unemployment rate to its highest level in four years, the U.S. Department of Labor reported.

The unemployment rate rose to 5.7 percent in July from 5.5 percent in June and up from 5 percent in April, suggesting that the economy’s woes are deeper than expected, Bloomberg reported.



“This is further evidence the economy is in a recession, probably a shallow recession,” said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Mass. “It will be a major drag on consumer spending.”

The last time the unemployment rate climbed so much in four months was in 2001, when the country was last in a recession. Job losses combined with decreasing property values, stricter lending rules and near-record energy prices to send consumer confidence close to its weakest level in 16 years in July.

Cutbacks at UAL Corp. and Starbucks Corp. signal that firings are spreading beyond builders and manufacturers as raw-materials costs soar. General Motors Corp., which announced a second-quarter loss of $15.5 billion today, may eliminate about 5,000 U.S. jobs by year’s end, Bloomberg reported.

Today’s report reinforces the case for Federal Reserve policy-makers to hold off on any interest rate increases until next year, economists said.

The Fed’s “hands are tied; there is nothing they can do with regard to this,” Kathleen Stephansen, director of global economics at Credit Suisse Holdings USA Inc. in New York, said in an interview with Bloomberg Radio.



Yields on Treasury securities dropped and stock-index futures advanced after the report was released because the job losses were less than projected.