U.S. nonfarm payrolls declined for the sixth straight month, falling in line with expectations by a total of 62k jobs in June, the Bureau of Labor Statistics reported. May's jobs figure was revised to a loss of 62k from an initially reported loss of 49k.

The unemployment rate remained at 5.5% following the half-percentage point surge in last month's rate. Nonfarm payrolls were expected to fall by 60k jobs in June, with expectations ranging from -20k to -130k. Also, economists expected the unemployment rate to have overshot last month and to come back down slightly to 5.4%. So far this year, the U.S. economy has shed 438k jobs.

While the June reading was in line with expectations, Rob Carnell, chief international economist at ING Wholesale Banking, pointed out that with around 50K of downward revisions to the previous two months of data, "the overall extent of the weakening in labour demand was somewhat nearer to our forecast for a 120K fall in employment than the consensus figure."

The services sector in the United States fell into contraction in June, with the Institute for Supply Management's non-manufacturing index falling to 48.2 from a previous reading of 51.7 and against expectations for a more modest decline to 51.0. Leading the decline was a record-low in employment, a record-high in prices paid and a slowdown in new orders as well as production.

"The release highlights the growth/inflation conundrum currently confronting the Fed, with both variables moving very strongly in the wrong direction," noted T.J. Marta, a fixed income strategist from RBC Capital Markets. "Inflation is a battle that can and needs to be fought by other countries. The Fed is the only central bank that can work to attain full employment in the US. At the very least, the Fed cannot hike, as is currently priced [in]."

Initial jobless claims in the United States surged to 404k in the week ending June 28, following an upward revision to 388k in the previous week from an initially reported 384k. Continuing claims fell to 3.116 million for the week ending June 21, according to figures released by the Department of Labor.

Forecasts were for initial claims to come in at 385k and for continuing claims to fall to 3.123 million following the previous week's rise to 3.139 million. This week's initial claims figure is above the four-week moving average, which is now 390k.

"The disappointing 62,000 decline in non-farm payroll employment in June is a timely reminder that the U.S. economy remains desperately weak," noted Paul Ashworth, senior U.S. economist at Capital Economics.

The soft U.S. data caused Fed fund futures traders to reduce the likelihood that the Federal Reserve will hike rates in the near future. Fed fund futures are pricing in an 86.8% chance the Fed will keep the target rate at 2.00% at the Aug. 5 Federal Open Market Committee meeting, up from a 75.3% chance on Wednesday.

Underground natural gas storage in the United States increased 85 billion cubic feet in the week ending June 27, according to the Energy Information Administration. The weekly increase was slightly below the +88 Bcf Bloomberg estimate and the +89 Bcf Reuters estimate. The previous week, the EIA reported a supply increase of 90 Bcf.

Crude oil closed the session above $145 a barrel for the first time.

The Royal Bank of Canada released its national forecast Thursday, in which it said the country's economy will manage growth of just 1.4% in 2008 but stage a quick recovery next year when it is expected to expand by 2.5%. The RBC report forecasts that Canada's core inflation rate will trend higher this year but remain below the Bank of Canada's 2% target and stay there through 2009.

Canada's housing market is also poised to cool, the forecast says, as soaring prices have driven the cost of home ownership beyond the reach of many families.

As expected, the European Central Bank's Governing Council raised its main refinancing rate 25 basis points to 4.25%. Rising upside risks to price stability and growing concerns over second-round inflation effects were cited as the main reasons behind the ECB's decision.

Following the announcement, ECB President Jean-Claude Trichet conceded that inflation was expected to remain above the ECB's target level for a protracted period of time and emphasized that upside stability risks in the medium term were "clearly on the upside and have risen further."

Data released overnight showed retail sales in the euro zone shot up 1.2% in May, up from the 0.6% increase expected. Year-over-year, retail sales rose 0.2% against expectations they would fall by a further 0.7% following the 3.0% decline in April.

According to data released by Markit Economics on Thursday, the euro zone services purchasing managers' index fell to 49.1 in June. Economists had expected the index to fall to 49.5, in line with preliminary estimates and down from May's 50.6 level. The euro zone composite PMI slipped to 49.3, down from both the 49.5 figure expected and May's 51.1 reading.

In a BBC radio interview aired on Thursday, Treasury Secretary Henry Paulson said that both the U.S. and the UK were "very focused" on the current economic downturn, but added that there was "plenty we can do" about the situation.

The Australian Bureau of Statistics (ABS) announced the Australian balance on goods and services in seasonally adjusted terms was a deficit of A$965 million in May 2008, a turnaround of A$977 million on April 2008. The figure for April has been revised to a surplus of $A12 million.

According to a report by AiG, Australia's performance of services index declined further to a reading of 45.4 in June compared to the 49.7 reported in May.

By Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Geoff Matthews, This email address is being protected from spam bots, you need Javascript enabled to view it , Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it , Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it and Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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