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US hiring improves but economy still weak
The service sector saw more jobs being created. Picture: AP

The outlook for the US job market has brightened a little after the government said fewer people have applied for unemployment benefits and surveys of private companies showed hiring increased in June.

The economy is still far from healthy. US service companies grew more slowly last month. Retail sales figures were disappointing. And central banks in Europe and China cut their interest rates, an indication that they expect weaker growth ahead.

But despite all the gloom, American factories and service firms kept hiring in June. Economists say that suggests many companies are less worried that the spring slump will endure.

"It is beginning to look like the labour market is not nearly as weak as feared," Joel Naroff, chief economist at Naroff Economic Advisors, said in a note to clients on Thursday.

The economy added an average of just 73,000 jobs a month in April and May. That's much lower than the 226,000 a month that were added in the first three months of the year. And it's far too low to reduce the unemployment rate, which rose to 8.2 per cent in May.

Weekly unemployment benefit applications dropped by 14,000 to a seasonally adjusted 374,000, the Labor Department said on Thursday. That's the fewest since the week of May 19.

Payroll provider ADP said businesses added 176,000 jobs in June. That's better than the revised total of 136,000 jobs it reported for May and, if sustained, would be enough to lower the unemployment rate.

Goldman Sachs responded to the better data by raising its forecast to a gain of 125,000 jobs last month, up from its initial prediction of 75,000.

Brian Bethune, chief economist for Alpha Economic Foresights LLC, said he expects job growth of 120,000 to 140,000. But he warned that even those figures were too weak to bring down unemployment.