May Job Losses Less Than Expected

Job losses declined to 345,000 in May, well below what economists had predicted and the fewest since last September, the Labor Department reported today.

Total unemployment rose to 9.4 percent, the highest unemployment rate in a quarter century, and up from 8.9 percent in April. However, many experts are focusing on the decline in new job losses as an indication that the economy, while perhaps not improving, is at least bottoming out.

"The recession is very close to an end," said Nariman Behravesh, chief economist of economic forecasting firm IHS Global Insight, according to Bloomberg News. "The labor market is still pretty awful, but vastly better than it was."

Economists surveyed before the figures were released had predicted new job losses would total more than half a million, so the May figures were almost one-third better than expected. Job losses over the previous six months had been averaging almost 650,000 per month.

Total unemployment was estimated at 14.5 million, up from 8.5 million one year earlier. Of those, 3.9 million reported being out of work for 27 weeks or longer, up 268,000 from April, representing 2.5 percent of the labor force and the highest proportion since 1983.

Parts of the report are seemingly contradictory, because the figures are based on two different surveys. Job losses, considered the more accurate of the two, are based on payroll surveys of U.S. employers. Total unemployment is based on a survey of U.S. households. The latter uses a smaller sample size and therefore has a higher degree of uncertainty, but also takes into effect self-employed persons, agricultural workers, household employees and others non-payroll workers.

As a result, the unemployment rate increased more than analysts expected, even while payroll job losses declined less than expected. Analysts had predicted a 9.2 percent unemployment rate, as opposed to the 9.4 percent rate reported. The total unemployment figures are based on the household survey.

Differences between the two surveys could be due to sampling error, higher rates of job losses among nonpayroll workers and increasing numbers of persons looking for work, such as new graduates seeking regular employment for the first time.