Utah's unemployment rate rose to 3.5 percent in July, with the biggest hit — 12,800 lost jobs — coming in the construction industry, the Utah Department of Workforce Services reported Tuesday.

"It is just part of the trend that is still downward," department chief economist Mark Knold said. "We still haven't seen the bottom of it."

The unemployment rate is up from the 3.3 percent recorded in June. In July of last year, Utah's unemployment rate was 2.7 percent, the department said.

Utah's situation is better than the national numbers. Unemployment nationally was 5.7 percent in July, up 0.2 percentage points from June and a full percentage point higher than July 2007.

About 48,900 Utahns were considered unemployed last month, compared with 37,000 in July 2007. Construction-industry jobs declined by 11.8 percent, a trend that is part of the nation's economic downturn, as the mortgage crisis has hindered home building. Declining home prices are key to a turnaround, but that could be two years away, Knold said.

Utah Home Builders Association president Randy Moore chalks some of the construction-job losses up to fewer building permits issued. Still, Utah isn't overbuilt, with more houses than families who need them, he said. But many families are refraining from buying homes because of financial factors.

A new $7,500 federal tax credit for first-time homebuyers could help with that, Moore said. "Coupled with more competitive pricing we see right now, it makes it a great time to buy."

Other job losses in Utah were seen in the financial industry, which was down 1 percent, or 800 jobs, and the information industry, which dropped by 0.6 percent, or 200 jobs.

Even so, Utah is still in job-growth mode, at an estimated 0.6 percent, the department said. The state had 7,300 new jobs in July 2008, compared with the same month a year ago. More than 1.25 million Utah residents had jobs last month.

But the job growth is slight, compared with previous years. Utah's job growth has averaged 3.3 percent a year since 1950. Last November, Utah's year-over-year job growth for nonfarm wage and salaried jobs was 4 percent.

Utah is faring better than the national average, however: National job growth is in negative territory, down 0.1 percent from a year ago.

The most robust growth in Utah came in the education and health industries, with 6,500 additional jobs, a 4.8 percent increase.

Utah also posted 3,900 new jobs in the trade, transportation and utilities industries; 3,800 in government; 3,200 in leisure and hospitality; 2,400 in professional and business industries; and a few hundred each in natural resources, manufacturing and other services. Those numbers represent between 0.1 and 4.6 percent job growth.

"Take construction out of the picture and you have an economy that's growing at 2 percent," Knold said.

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E-mail: jtcook@desnews.com