The nation's unemployment rate surged to 7.8 percent in June, the highest level in more than eight years, as the weak economy proved unable to absorb an influx of job seekers, the government said yesterday.

The Labor Department said the June rate was a seasonally adjusted 0.3 percentage points higher than the May level of 7.5 percent and 0.6 percentage points above the April number. The June rate was the highest since March 1984.

The second consecutive big deterioration caught economists by surprise.

The Federal Reserve responded yesterday by slashing its key discount rate from 3.5 percent to 3.0 percent, in an effort to sustain a recovery on the brink of repeating last year's stall.

Following the Fed's announcement, Morgan Guaranty Bank, the banking unit of Morgan Guaranty Trust Co., Bank of America, and other major banks cut their prime rates to 6 percent from 6.5 percent, effective immediately.

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