Pace of US job cuts slows in May

Many hope the worst is over

US employers cut 345,000 jobs in May, the US Labor Department has said, far fewer than expected and the lowest monthly job loss since September.

The number of job losses in March and April was also revised down to 652,000 and 504,000 respectively.

The latest data provides further support to those who believe that the US economy is over the worst.

However, the US jobless rate rose to 9.4% in May, the highest since 1983, up from 8.9% in April.

Service sector industries shed 120,000 jobs in May. Another 156,000 jobs went in manufacturing, a figure which probably reflects shutdowns at car plants.

Construction industries shed 59,000 jobs, down from 108,000 in April. This lower fall could be the result of the government's stimulus package, which has boosted public spending.

Economists had forecast a total loss of 520,000 jobs in May.

Rising unemployment

The increase in the jobless rate, despite the slowdown in the pace of job cuts, could be because the US Labor Department data is made up of two separate reports: it surveys employers to calculate payrolls and surveys a representative sample to estimate the jobless rate.

Many economists believe the jobless rate could hit 10% by the end of the year.

We have not just green shoots but an authentic sighting of the Jolly Green Giant himself

Robert Brusca, FAO Economics

Since the start of the recession at the end of 2007, the US economy has lost six million jobs.

Analysts produced a range of interpretations of the latest set of jobless numbers. Some were upbeat about the outlook for the US economy.

"Good news at last. At some point we had to start moving to the 300,000 range, after all we already laid off an incredible amount of people," said Kurt Karl, chief US economist at Swiss Re.

"This reading is probably not an outlier, we are likely to keep improving until the end of the year," he added.

Robert Brusca at FAO Economics was even more optimistic and argued that the jobless number was more important than the unemployment rate.

"We have not just green shoots but an authentic sighting of the Jolly Green Giant himself," he said . "Forget the unemployment rate. It lags. Jobs are doing what they do at end recessions and in early recoveries."

But other analysts, noting that the US economy is still shedding jobs at an historically high rate, were rather more circumspect.

"I think the green shoots story may be a bit premature," said Mark Vitner, economist at Wachovia Corp.

"There is no indication of any hiring. What would be a green shoot is if we saw a pickup in temporary hiring, but this has slowed."

Tim Quinlan at Wachovia said: "The bottom line is that, while we are seeing improvement, it's still not a pretty jobs market."

Mixed messages

The latest unemployment figures come against a backdrop of mixed US economic data.

Last month, a key survey showed that consumer confidence was at its highest since last September, while separate figures showed an increase in the number of second-hand homes sold in April.

However, official data also showed that, despite the fact that consumers were feeling more optimistic, they actually spent less in April than in the previous month, while the number of new homes built in the US hit a record low in April.