America’s unemployment rate jumped to a four-year high in July, its seventh consecutive monthly increase, providing further evidence that the economy is heading towards recession in the second half of the year.

The gloomy employment data, disappointing second-quarter results announcements from General Motors and NYSE Euronext and rising oil prices combined to push down stock markets in the United States.

The Standard & Poor’s 500 index fell by 7.10 points to close the day at 1,260.30 in New York, while the Dow Jones industrial average declined by 51.70 points to end at 11,326.30.

The Labour Department reported yesterday that non-farm payrolls had fallen by 51,000 in July, the same decline as in June against a 47,000 drop in May.

The unemployment rate, which is calculated using a separate survey of households, rose by 0.2 percentage points to 5.7 per cent last month, the highest level since March 2004 and up from 5.0 per cent at the end of April. The last time that the unemployment rate increased so much over three months was at the end of the last US recession in 2001.

The jobless numbers cement expectations that American interest rates will remain on hold for the foreseeable future. Lou Crandall, chief economist at Wrightson Icap, the research firm, said: “At the end of June the FOMC predicted that the unemployment rate would hit between 5.5 and 5.7 per cent in the fourth quarter. Little more than a month later, it has already broken through the top end of expectations.”

The Labour Department also noted a “notable increase” in youth unemployment over the past three months.

However, average hourly earnings increased $0.06, or 0.3 per cent, to $18.06 in the month — a 3.4 per cent rise from a year earlier.

Separately, a new housing report provided further evidence of the property market’s decline, with prices falling in 23 of America’s 25 metropolitan areas in May.

Sacramento, California, suffered the biggest drop, with its average house price falling by 31 per cent in the year to May, 2008, according to Radar Logic, the property research group.

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