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U.S. unemployment rate hits 9.4% in May, highest since 1983

The Labor Department report offers some hope, however: The 345,000 jobs lost last month are the fewest since September and half the average of the previous six months.

June 06, 2009|Janet Hook and Jim Tankersley

WASHINGTON — The nation's breathtaking pace of job loss slowed significantly in May, bolstering hopes that the worst of the recession is over. But millions of Americans and their families face continued economic pain with the unemployment rate jumping to 9.4%.

The contrasting trends underscore a painful economic reality: Even as the recession winds down, hundreds of thousands of workers may continue to lose their jobs -- and the unemployed may be among the last to reap the benefits of recovery.

The Labor Department reported Friday that the U.S. economy shed 345,000 jobs in May, bringing the total number of jobs lost in the recession to 6 million. The unemployment rate rose to the highest level since 1983, a full one-half percentage point above the 8.9% in April.

Normally, losing more than 300,000 jobs in one month and seeing the jobless rate near 10% would be cause for alarm. But May's job losses are the lowest since September and were only half the average monthly losses in the last six months.

In the present climate, that is seen as the latest in a series of signs that the economy is beginning to turn around. Home sales are up. Consumer confidence is improving. The stock market has rebounded since hitting a 12-year low in March.

"The pace of the recession finally seems to be slowing," said Andrew Stettner, deputy director of the National Employment Law Project. "But with the unemployment rate climbing, it should be abundantly clear that the job market is in a hole that could take years to climb out of."

Labor Secretary Hilda Solis said dislocated workers historically have had a hard time getting back into the workforce.

"It's not going to turn around as quick as you and I would like to see it," Solis said in an interview to be aired Sunday on C-SPAN.

Wages remained essentially flat last month, the government reported. And providing further evidence of uncertainty about the future, the Federal Reserve Board reported Friday that consumer borrowing dropped by $15.7 billion in April -- one of the biggest monthly drops ever in dollar terms.

The decline suggests that even though confidence may be up, consumers remain wary of major new spending. That raises a caution flag about the speed with which a recovery may develop. Consumer spending accounts for about 70% of the nation's gross domestic product.

In commenting on the jobs report, Vice President Joe Biden said the administration would announce plans Monday to speed up expenditure of money under the $787-billion economic stimulus law passed this year.

Republicans said the rising unemployment rate had cast doubt on whether that program was working effectively.

"The only industry that appears to be on a hiring spree is us, the federal government," said Rep. Kevin Brady of Texas, ranking Republican on the Joint Economic Committee. "But government hiring is not an effective method for aggregate job growth."

Economists say that it is too early to assess the job-creation effect of the stimulus program and that it is hard to measure how many layoffs have been prevented.

But Sung Won Sohn, an economist at Cal State Channel Islands, said the stimulus had helped the job market by giving employers more grounds for optimism about the future.

"The psychology has improved significantly because of the massive economic stimulus program," Sohn said. "That's one of the reasons why layoffs are slowing down."

The still-grim realities of the job market were underscored by the government's calculation regarding workers who had abandoned their job searches or settled for part-time employment. If they were factored in, the Bureau of Labor Statistics said, the nation's unemployment rate would have been 16.4%.

Hiring and firing trends varied widely through the diverse U.S. economy.

Manufacturing employment continued to drop sharply, led by 30,000 lost jobs related to the domestic automobile industry. The bureau reported that the number of auto-related jobs had fallen by 50% from its recent peak in 2000.

In contrast, the education, healthcare, and leisure and hospitality sectors posted no losses in May.

In construction, 59,000 jobs were lost in May -- a major improvement from the last four months when an average of 125,000 jobs a month were lost. That industry is a beneficiary of the infrastructure spending that is a major element in the stimulus program.

Private service industries also saw their losses slow -- a sign that even if a robust recovery is not underway, the free fall has been halted.

"That's good news," said Nigel Gaunt, chief U.S. economist for IHS Global Insight. "They are out of the panic phase."

--

janet.hook@latimes.com

jtankersley@tribune.com

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