Unemployment Rate Rises To 9.4 Percent In May

The nation's unemployment rate last month is the highest it's been in more than 25 years. However, the pace of layoffs eased. Employers cut 345,000 jobs in May, the fewest since September.

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RENEE MONTAGNE, host:

NPR's business news starts with unemployment up to nearly 9.5 percent.

(Soundbite of music)

MONTAGNE: The government released the latest numbers today. The economy lost 345,000 jobs in May, and that's actually much lower than expected. Still, the overall unemployment rate came out higher than many economists had predicted. It's now 9.4.

NPR's Jim Zarroli is covering this story and joins us now. And Jim, I mean bottom line, what - one's lower and one's higher - is it good or bad news?

JIM ZARROLI: Well, this is a labor market. It's still very much feeling the effects of the recession. We had a loss of 156,000 jobs in manufacturing, partly because of the trouble in the auto sector. You know, construction down another 59,000. The economy has lost more than seven million jobs since the recession began.

The important thing here, though, I think, is - and what the headline is likely to be tomorrow morning, is that the 345,000 job loss is still a lot less than we've seen in previous months. On average the economy has been losing, you know, more than 600,000 jobs for half a year, so you know, this is a big drop, but it's sort of - it's bad but it's less bad than it has been.

MONTAGNE: What else does the report tell us about how the jobs market is faring right now?

ZARROLI: You know, I think it's one more kind of piece of encouraging news about the recession, a sign that the, you know, the recession may be bottoming out. It's not over. But almost every day we're seeing these little signs that the worst is over, you know, consumer confidence is up, factory orders were up this week. These are the kinds of little things that economists look for to gauge when a recession is nearing an end, and we've been seeing a lot of them. A lot of economists are now saying, you know, by late summer, early fall we should see the recession end. And in the meantime, businesses are feeling more confident and they're not laying off as fast as they were at, say, the start of - at the end of last year.

MONTAGNE: If things are getting better, what, do you explain the big rise in the unemployment rate in the sense of, you know, they're not laying them off as fast but they're still laying them off?

ZARROLI: It is a big rise. It had been 8.9 percent in April. Now it's 9.4 percent. This is always confusing - you know, how can you say the labor market is improving when unemployment is rising? But the payroll figures, which is what we're looking at this morning, and the unemployment rate, measure different things.

Unemployment is the number of people actively looking for work, and that's affected by a number of things. In May, for instance, you had a lot of college kids graduating and looking for jobs. The government tries to factor in these seasonal fluctuations, but it can be difficult. The other things is, unemployment is a lagging indicator. Businesses only start to hire when they're sure they can afford it. You know, they don't do it right away. So you can have a situation where the economy's improving, but unemployment is climbing, and so you can look for the unemployment rate to keep climbing in the months to come.

MONTAGNE: Does the - going back to your mention of an improving economy - does it suggest that the big stimulus package passed by Congress earlier this year is now doing what it was supposed to do?

ZARROLI: Well, I think the stimulus package is not a big factor, simply because a lot of the money hasn't been spent yet. You could make the argument that all the things the Fed and the Treasury Department have done to stabilize the financial markets are having an effect, and certainly the stock market believes that. It's been up a lot. It was up this morning.

I think the other argument you're going to - you should be hearing now is that, you know, the economy is improving, it may be time for the Fed to start thinking about pulling back. It's put a lot of money into the economy; it needs to reverse course or it risks inflation. We're already seeing a big rise in the long-term interest rates, which is a sign the markets are worried about inflation, so the Fed needs to take some action.

MONTAGNE: NPR's Jim Zarroli, thank you very much.

ZARROLI: You're welcome.

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Jobless Rate Rises To 9.4 Percent, But Layoffs Slow

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

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