WASHINGTON (Dow Jones)--U.S. job losses softened markedly last month, sending one of the strongest signals yet that the severe recession may be winding down.
Still, another jump in the unemployment rate to a fresh 25-year high served as a sober reminder that even if the economy does stabilize in coming weeks, a rapid return to growth is unlikely given the pressures households face from a sluggish labor market.
Non-farm payrolls slid 345,000 in May, the U.S. Labor Department said Friday, well below the 525,000 decline economists in a Dow Jones Newswires survey had expected. Last month's drop was the smallest since September 2008, when the recession intensified in the wake of the collapse of Lehman Brothers.
"It looks like the economy has hit bottom and the recession is all but over," said Chris Rupkey, economist at Bank of Tokyo-Mitsubishi, though "full recovery is several months away." The economy has now lost six million jobs since the recession started in December 2007, with most of those losses occurring in the last six months. The 17-straight monthly job losses matches the record reached during the 1981-1982 recession.
"Jobless losses continued to be widespread in May, but the rate of decline moderated in construction and several service-producing industries," said Keith Hall, Commissioner of the Bureau of Labor Statistics.
The unemployment rate, calculated using a survey of households as opposed to companies, increased 0.5 percentage point to 9.4%, the highest level since August 1983. Economists had expected a 9.2% rate.
Many economists expect that rate to top 10% soon. Not only does the economy have to stop losing jobs before the jobless rate stabilizes, it actually has to add payrolls at a modest rate just to keep up with new entrants into the labor force.
In Congressional testimony Wednesday, Federal Reserve Chairman Ben Bernanke warned that the labor market "tends to lag" the business cycle, "and so even as the economy begins to recover, unemployment can still remain high."
By broader measures, unemployment - or at least underemployment - is already well into double digits. When marginally attached and involuntary part-time workers are included, the rate of unemployed or underemployed workers hit 16.4% last month, up from 15.8% in April and almost seven percentage points higher than it was one year ago.
Still, the deceleration in layoffs is welcome news at a time when other indicators suggest the recession may be nearing an end. The Institute for Supply Management manufacturing index increased in May from April, as did automobile sales, an indication that businesses and consumers alike may be finding their footing.
Average hourly earnings advanced $0.02 to $18.54. That was up just 3.1% from one year ago, a sign that inflation isn't a threat. However, stagnant wages could also weigh on consumer spending.
According to Friday's report, hiring last month in goods-producing industries fell by 225,000. Within this group, manufacturing firms cut 156,000 jobs, bringing the total since the recession began to 1.8 million.
In contrast, construction employment was down just 59,000 last month, the smallest decline since September.
Service-sector employment fell 120,000, well below its peak losses of nearly 400,000. Business and professional services companies shed 51,000 jobs, and financial-sector payrolls were down another 30,000.
Retail trade cut 17,500 jobs, while leisure and hospitality businesses added 3,000 an indication that households may be boosting non-essential spending.
In a positive signal for future employment prospects, temporary employment - which economists consider a leading indicator - fell by only 6,500, its best performance in many months.
Education and health care added 44,000 jobs.
The government shed 7,000.
The average workweek was down 0.1 hour at 33.1 hours, a record low. A separate index of aggregate weekly hours fell 0.7 percentage point to 99.7.
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