May unemployment reached 9.4 percent, its highest rate in a quarter century, but the number of job cuts was far less than economists had feared and the fewest since September, the Labor Department reported Friday.
The data followed a report the previous day in which the total number of continuing claims for unemployment benefits fell for the first time since January, a month that witnessed the largest job losses since 1949.
The Labor Department said employers cut 345,000 jobs in May. Since the start of the recession in December 2007, about 7 million people have lost their jobs and the total number of unemployed people stands at 14.5 million. The number of people who have been unemployed for over two years has tripled since the beginning of the recession.
The unemployment rate, up from 8.9 percent in April, was the highest since July 1983 and higher than the 9.2 percent economists had forecast. Actual job losses were considerably fewer than the 520,000 expected, but that was offset by larger-than-expected growth in the work force.
If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 16.4 percent in May, the highest on records dating to 1994.
March and April's job losses also were revised to show smaller declines than first reported.
Manufacturing Sector Still Hit Hard
Although the number of job cuts eased, steep losses were nonetheless felt in the manufacturing sector, while declines in construction and the service sectors moderated, Labor said.
Manufacturing shed 156,000 jobs for the month, including in motor vehicles and parts, machinery, and fabricated metal products. Unemployment in construction increased 59,000, concentrated in specialty trade contracting and residential construction. Retail trade was also down 18,000 jobs.
Education, health care, leisure and hospitality industries all added jobs in May.
Unemployment is considered a lagging indicator of economic health, and job cuts could still increase even as the broader economy rebounds.
Shortly after the numbers were released on Friday, White House economic adviser Christina Romer emphasized that point, saying "the unemployment rate is going to be high and probably stay high for a while, precisely because that is sort of the normal pattern as we come out of recession."
The Federal Reserve forecasts that unemployment will remain high into 2011, given an expectation of tepid recovery. Economists say the job market may not return to a 5 percent unemployment rate until 2013.
Signs Of A Recovery?
The numbers join fresh signs emerging earlier this week that the economy could be recovering.
The number of people continuing to draw unemployment benefits dipped for the first time in 20 weeks, and first-time claims also fell. Manufacturing's slide is slowing. Builders are boosting spending on construction projects, and a barometer of home sales firmed.
Although shoppers remain cautious according to sales results from major retailers, Federal Reserve chairman Ben Bernanke and other economists are hopeful that consumers won't return to the deep hibernation seen at the end of last year.
That's when the recession hit with brutal force, causing the economy to contract at a 6.3 percent pace, the most in 25 years. Consumers cut their spending at the time by the most in nearly three decades. Economic activity shrank at a 5.7 percent pace in the first three months of this year, despite a rebound by consumers.
Many analysts believe the economy is shrinking at about a 2 percent pace in the current quarter, and that the economy could return to growth as soon as the third quarter. President Obama's stimulus package should help bolster the economy.
Ripple effects from General Motors Corp.'s filing for bankruptcy protection — the fourth-largest in U.S. history — could muddy the outlook, some analysts said. GM said earlier this week it will close nine factories and idle three others indefinitely as part of its restructuring. The closings, which will take place through the end of 2010, will cost up to 20,000 workers their jobs.
From NPR staff and wire service reports