Older workers are fearful about the future

The increase compares with a jobless rate of 7.5% in the January to March period and takes unemployment back to the record level set in mid-2000, the Census and Statistics Department said.

The economic toll is also revealed in rising underemployment figures - up to 3.2% from 2.9% - which cover employees who do not earn enough to live on.

Many staff in the worst-hit sectors of the economy have taken pay cuts or are working part-time.

Recession forecast

The unemployment figures came as a member of the Australian central bank's board predicted Hong Kong would slip into recession this year.

The joint report by Warren McKibbin, who sits on the central bank board, and fellow economist Andrew Stoeckel, said China's economic growth could take a 2.4% hit because of Sars.

"That is enough to tip Hong Kong into recession, but not China," their report said.

Meanwhile, French bank BNP Paribas predicted that Hong Kong's economy would lose one percentage-point in growth.

BNP Paribas forecast Hong Kong would manage 1.5% growth in 2003 rather than its earlier forecast of 2.5%.

It shaved its predictions of China's growth to 7% from 8%, a relatively optimistic view as some economists have predicted China's growth rate could stutter to 5.5%.

Hope of improvement

Hong Kong appears to be getting the Sars outbreak under control.

It reported two deaths and four new cases on 20 May, the seventeenth successive day that new infections have been in single figures.

The reduction in new cases raises the prospect that the World Health Organisation (WHO) may soon lift its advice against travelling to Hong Kong.

The WHO has said it would lift the advice if new infections averaged five a day over three days.

Hong Kong had been battling against slow economic growth for many months before Sars struck in mid-March 2003 as its global markets remained shaky and mainland China proved a bigger draw for foreign investors.