Capitol Hill Democrats renewed their push for a second stimulus package. The Bush administration and other Republicans have been cool to the idea.

The White House was "displeased" with the jobs report, press secretary Dana Perino said. She said the White House was "working to improve the job outlook for our economy."

With the economy a top concern for voters, the presidential candidates, Republican John McCain and Democrat Barack Obama, seized on the jobs figure and traded swipes at their proposals to turn things around.

"With job losses mounting, prices rising, increased turbulence in our financial system and a growing credit crunch, we need to do more," said Obama.

He called for a $1,000 emergency rebate for Americans to offset soaring energy costs. "We cannot afford four more years of the failed Bush economic policies and that is what Sen. McCain if offering," Obama said.

McCain said Obama's tax plan will send jobs overseas. He supports proposals to help small businesses create jobs. "Americans are hurting and today's job numbers are just the latest reminder of the economic challenges we face," he said.

The increase in the unemployment rate in July came as many young people streamed into the labor market looking for summer jobs. Fewer of them were able to find work. The unemployment rate for teenagers jumped to 20.3 percent, the highest since 1992.

Still, the job losses were not as some fears. Economists were expecting 72,000 jobs lost for July. The government also revised the job-loss figures for May and June to a combined 98,000, down from 124,000.

All told, there were 8.8 million people unemployed in July, up from 7.1 million last year. The jobless rate last July was a full percentage point below where it was this July.

Wages went up modestly last month, but prices have been rising faster. Average hourly earnings rose to $18.06, up about 3 percent from last year. High food and fuel costs mean paychecks aren't stretching as far, though.

"It's easy to see why consumer spending is expected to remain weak through the summer, if not the rest of the year," said Bernard Baumohl, managing director and chief economist at The Economic Outlook Group.

The Federal Reserve is expected to hold interest rates steady next week as it tries to grapple with dueling concerns — a weak economy and inflation.

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AP Business Writer Christopher S. Rugaber contributed to this report.