The U.S. shed 345,000 jobs in May, the government reported on June 5, and that's far fewer than analysts expected. However, the unemployment rate rose to 9.4% from 8.9% in April. Analysts had predicted that 550,000 jobs would be lost in May and the unemployment rate would reach 9.2%.
Adding to the upside, job losses from April and March were revised upward: from –539,000 to –504,000 in April, and from –699,000 to –652,000 in March.
Stock futures gained following the report, and bond yields moved higher. According to analysts at Action Economics: "The improvement in the headline number supports recent rotation into riskier assets—reinforcing expectations that the hefty declines of Q4 and Q1 are now diminishing, even as the economy continues to contract."
The number of unemployed increased by 787,000, to 14.5 million, the government said. Steep jobs losses continued in manufacturing, but declines moderated in construction and several service-providing industries.
The data suggest that the pace of job loss may be easing from the steep declines of the end of 2008 and the first months of 2009. But even if the worst of the job-loss free fall is over, the labor market remains weak. Many economists expect unemployment to reach double digits by early 2010, and possibly later this year.
Returning Workers Boost Unemployment
Paul Ashworth, senior U.S. economist at Capital Economics in Toronto, said the surge in the unemployment rate was boosted by workers returning to the active labor force as much as the ongoing job losses. "Overall, this report adds to the evidence that the economy is getting back to where it was before the financial crisis intensified last September. Nevertheless, the bottom line is that jobs are still being lost at an unusually high rate, suggesting that the economy is still in recession. But if the rate of improvement continues, output should begin to expand again in the second half of the year."
In May health care posted gains, while government employment was generally unchanged. Most other industries continued to lose jobs.
In May the construction industry lost 59,000 jobs, an improvement over 108,000 jobs lost in April. Since construction employment peaked in September 2006, the sector has lost more than 1.4 million jobs.
Retail—where job losses have declined sharply in the last two months—shed 17,500 jobs in May. The industry has lost 766,000 jobs since November 2007.
Finance and insurance: These industries lost 19,300 jobs in May. Since December 2007 finance and insurance have lost more than 300,000 jobs.
Manufacturing: The sector lost 156,000 jobs in May, in most component industries, adding to the 154,000 lost in April.
Herbst is a reporter for BusinessWeek in New York.