Sagging employment prompted a Boise economist to suggest Friday that higher fuel costs are now conspiring with a rising minimum wage to cost some Idahoans their jobs.

"If I was a prudent businessman, I'd think twice about adding people right now," economist John Church said.

The Idaho Department of Labor reported Friday that the state's jobless rate jumped three-tenths of a percentage point in July to 4.1 percent. That was:

The largest June-to-July increase on record.

The fifth consecutive monthly increase in unemployment.

The highest statewide rate since May 2005.

The end to a string of 37 consecutive months when Idaho's unemployment rate was below 4 percent.

Treasure Valley joblessness also climbed three-tenths of a percentage point, to 4.6 percent.

The report came as Idaho gasoline prices stayed slightly above $4 a gallon on average and oil prices rose above $125 a barrel despite dipping earlier in the month. The minimum wage rose July 24 to $6.55 an hour, up from $5.85, in the second of three annual increases.

"It (the economy) is sluggish, and it looks like it's going to remain that way," Labor Department spokesman Bob Fick said. "If you're looking for a bright spot, at least we're still 1.6 percentage points below the national average."

Nationwide, stores, factories and other businesses large and small continued to cut payrolls last month, sending the U.S. unemployment rate to 5.7 percent. That's the highest rate in four years and new evidence that an economic recovery is far off.

"This is not good news," Church said. "We'd better pray for lower oil prices, because higher gas prices are a hidden tax on people. And that's stopping people from spending money" on other things.

The construction sector statewide added fewer than 1,000 jobs in July.

"That's nothing compared with what we should be getting during the heat of the summer," Fick said. "It should be substantially higher."

Unemployment in the state has risen 1.5 percentage points since December, when the jobless rate stood at 2.7 percent.

Idaho has now lost 5,000 jobs since July 2007. The 722,000 people working in the state last month were the fewest since September 2006. The 31,000 Idahoans out of work were the most since October 2004, when the state was still feeling effects of the last recession.

Still, the 494,924 weeks of unemployment benefits paid out so far in 2008 remain well below the record 581,465 weeks of benefits paid for the comparable period in 2003, Fick said.

The nationwide report issued Friday showed employers cut 51,000 jobs in July, bringing the total number of U.S. jobs lost since Jan. 1 to 463,000.

Elsewhere, the Commerce Department said spending on construction projects around the country dropped 0.4 percent in June, as cutbacks in home building eclipsed gains in commercial construction.

And manufacturers' business was flat in July. The Institute for Supply Management's reading of activity from the producers of cars, airplanes, appliances and other goods hit 50, down from 50.2 in June. A reading above 50 signals growth.

Job losses in July were the heaviest in industries hard hit by the slow housing market, the clampdown on credit and the shaky financial sector. Manufacturers cut 35,000 jobs, construction companies 22,000 and retailers 17,000.

Wall Street responded negatively. The Dow Jones fell 51.70, or 0.45 percent, to 11,326.32, ending the week down 0.39 percent. The Standard & Poor's 500 index fell 7.07, or 0.56 percent, to 1,260.31, and the Nasdaq composite index fell 14.59, or 0.63 percent, to 2,310.96.

Joe Estrella: 377-6465. The Associated Press contributed to this report.