The US economy shed more jobs than expected in July, the Labour Department said yesterday, heightening fears that the world’s largest economy will take years to fully recover from a crippling recession.

Some 131,000 jobs were lost and the unemployment rate remained stuck at 9.5 per cent last month, officials said, as federal and local governments slashed jobs.

The private sector was unable to offset a massive government layoff of 143,000 census-takers, with firms creating only a modest 71,000 jobs.

The figures were seen as yet another sign that the US economic recovery is stagnating, and that the jobs market may take years to get back on its feet.

“The current pace of employment is too slow to replace the more than eight million jobs lost in the recession – not in the next year or two, perhaps even not in the next five years,” said Bart van Ark, chief economist of The Conference Board, a business research firm.

“It’s unlikely that industries such as construction and manufacturing will ever return to pre-recession employment levels.”

Analysts had predicted the ranks of working Americans would shrink by 87,000 in July, pushing the unemployment rate up to 9.6 per cent.

Revisions to June figures also compounded the angst. The Labour Department said 221,000 jobs had been lost versus the 125,000 earlier reported.

That piled pressure on President Barack Obama to prove his economic policies are working ahead of November midterm elections.

Speaking at a Washington sign-makers plant, Mr Obama pointed to the distance the private sector has travelled since the depths of the recession.

“The fact is we’ve added private sector jobs every month this year, instead of losing them, as we did for the first seven months of last year. That’s a good sign”

But he admitted, “the road to recovery doesn’t follow a straight line. Some sectors bounce back faster than others.”