* US unemployment at 26-year high, Europe at 10-year peak
* US, euro zone jobless rates both at 9.5 percent
* ECB chief says weak economic activity to hamper growth
* Brazilian auto, industrial output data a bright spot
By Herbert Lash and Mark John
NEW YORK/BRUSSELS, July 2 (Reuters) - Unemployment surged across Europe and the United States, data showed on Thursday, with no sign of a peak as economists and officials said recovery from a deep global recession is not yet in sight.
The chief of the European Central Bank warned that while the downturn had eased, weak economic activity would hamper growth for the rest of the year and only a gradual recovery would emerge by mid-2010.
In an effort to spur economic activity, the ECB kept interest rates at 1.0 percent in the euro zone, bolstering expectations that they will stay there well into next year.
World stocks extended losses on release of the jobless figures, as investors found little evidence of a sustainable economic recovery. Government debt prices and the U.S. dollar rose as the jobless data raised risk aversion among investors.
U.S. employers cut more jobs than expected in June, pushing the jobless rate to a 26-year peak, and unemployment in Europe rose to a 10-year high, scuttling hopes for a quick recovery.
While manufacturing data from around the world this week pointed to a bottoming of the global recession, economists said unemployment and the buying power of consumers were poised to suffer further -- an ominous sign, even for those with a job.
Much has been said about the lagging nature of unemployment reports, yet less well known is the fact that wage growth lags even more and could be pressured by inflation as wages are held steady by high unemployment.
'A LOT OF BAD NEWS'
"Basically, for households there is a lot of bad news ahead, both in terms of unemployment, but also in terms of slowing wage growth," said economist Nick Kounis of Fortis.
Jobless rates in the United States in June and the 16-nation euro zone in May both rose to 9.5 percent. The rate rose from 9.3 percent in April in the 16-nation euro zone, European Union data showed, and was up from 9.4 percent in May in the United States, the U.S. Labor Department reported.
Statistics office Eurostat calculated that 3.4 million people in the currency zone lost their jobs in the 12 months ended in May, with 5.1 million joining jobless lines across the 27-nation EU.
Since the U.S. recession started in December 2007, U.S. payroll employment has dropped by a total of 6.5 million.
"It's evident that it's going to be a much longer process to bottom out in the labor market than it is to bottom out in the auto market or industrial production or GDP," said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.
In a surprise move to reverse its worst recession since the 1940s, the Swedish central bank cut interest rates in half to a fresh record low of 0.25 percent, and offered 100 billion crowns ($13.2 billion) of loans to banks to foster lending.
The ECB also said it would start buying 60 billion euros of covered bonds next week as part of its unorthodox program to buy mortgage and public sector-debt backed bonds.
GLOOMY DATA
The U.S. and euro zone jobless data added to gloomy data from across the developed world, but more bright spots appeared in developing nations.
A top official at the International Monetary Fund said the IMF will probably revise upward its global economic growth forecasts as output declines begin to moderate and financial market conditions improve. A new forecast is due in the autumn.
India's finance ministry said in a report that the Asian giant could see growth of around 7 percent this year and more in coming years if it makes sweeping reforms.
"India should be back on the new trend growth path of 8.5 to 9 percent per annum provided the critical policy and institutional bottlenecks are removed," the report said.
In Brazil, industrial production posted modest gains, while automotive sales soared as consumers flocked to showrooms to take advantage of tax breaks that have lowered car prices.
New automobile sales in Brazil soared 21.5 percent in June from May, turning in a record month, the national dealers' association Fenabrave said. Sales of new cars and trucks also surged 17.2 percent when compared with June 2008, Fenabrave said.
Industrial production in Brazil rose more than expected in May, marking the fifth straight month-on-month increase, but slumped when compared to May 2008, the government's statistics agency IBGE said.
In Britain, data showed that a decline in activity in the construction sector accelerated in June and UK lenders said they did not expect much of a pick-up in demand in the third quarter even though they would make more credit available.
The Bank of England's David Miles warned parliament that while the next few quarters could see a rebound, a return to rapid growth was unlikely.
In Japan, Economics Minister Yoshimasa Hayashi said he will do his utmost to prevent price falls from persisting in the economy, which is facing its second bout of deflation this decade. (Reporting by Reuters bureaux worldwide; Writing by Herbert Lash; Editing by Will Dunham)