The US economy lost 125,000 jobs in June, more than economists had forecast, as thousands of temporary census jobs ended and private hiring grew less than expected.

And though the unemployment rate unexpectedly fell to 9.5% from 9.7%, the lowest in a year, it was largely due to more people dropping out of the labor force.

The report was the latest sign that the economic recovery may be faltering.

“Overall what this does is it reinforces the market’s view that the U.S. recovery is losing steam,” said Greg Salvaggio, vice president of trading at Tempus Consulting in Washington.

Stocks tumbled in reaction to report, while Treasury debt prices slipped.

With unemployment stubbornly high, household spending has turned sluggish in recent months, threatening to create a vicious cycle that stock market investors and some analysts worry could tip the economy back into recession.

“We are in a difficult situation. I don’t think there is political will to have another stimulus program and even if we did I am not sure people feel it would be that effective,” said Stephen Bronars, a senior economist at Welch Consulting in Washington.

The Federal Reserve is also in a bind. It has held benchmark overnight interest rates close to zero since December 2008 and has pumped more than $1 trillion into the economy.

http://www.cnbc.com/id/38054214