Jobless rate reaches nine-year high

WASHINGTON -- The nation's unemployment rate climbed to a nine-year high of 6.1 percent in May, but a slowing in the rate of job losses raised hopes that the weak economy is starting to recharge.

Still, it could be months before companies start hiring again.

Businesses cut just 17,000 jobs last month, following a revision in April in which no jobs were lost, the Labor Department reported Friday.

The annual revisions, made to better reflect actual economy conditions, showed that job losses this year were not nearly as steep as initially reported.

"We've got a long way to go," said economist Ken Mayland, president of ClearView Economics. "But as they say, the longest journey begins with a first step. It looks like we've taken that first step."

Stocks initially surged, but fell in afternoon trading. The Dow Jones industrial average closed up 21 points, but the Nasdaq was down 18 points.

Private employers showed an overall hiring increase, but that was offset by big government cutbacks, mostly at the state and local levels.

"Layoffs appear to be slowing, but we're not seeing enough hiring," said Bill Cheney, chief economist at John Hancock Financial Services.

"In good times people find new jobs quickly," he added. "Obviously, as anyone looking for a job will tell you, that's not happening now."

The 6.1 percent rate was up one-tenth of a percentage point from April, peaking at a level not seen since the country was emerging from the last recession.

July 1994 was the last time the jobless rate was at 6.1 percent. The last time the rate was higher was in April 1994, when it reached 6.4 percent.

Economists think the rate will continue to rise in coming months. As the economy improves, job growth probably will not be strong enough to accommodate all the job seekers. That would contribute to a rise in the unemployment rate, which happened last month.

"It's tough out there," said Pat Friend, president of the Association of Flight Attendants. About 10,000 members have been laid off since Sept. 11, 2001, she said.

Transport woes

The transportation industry has lost jobs for seven straight months. Airlines have been hardest hit, losing another 5,000 jobs in May.

For flight attendants, "I don't think we're finished reducing the work force," Friend said. "But we may be finished reducing it by layoffs." Airline work forces are being trimmed through attrition, she said.

Also driving May's overall payroll losses were manufacturing jobs, down 53,000, and government employment, down 25,000.

Some sectors gained jobs in May. The services industry added jobs, fueled by gains in professional and business services and in education and health.

Construction companies also added to their payrolls for a third consecutive month.

Another positive sign in the report was the hiring increase of 58,000 at temporary employment firms. Economists closely watch that industry, because it can signal when companies may begin to hire permanent, full-time workers.

Businesses remain cautious, said Carl Camden, president of Kelly Services, the Troy, Mich.-based temp company. But demand has increased at customer call centers, distribution facilities, technology and engineering companies, and in health care, education and finance.

The "prevailing economic ambiguity has most companies remaining tentative in initiating new projects and activities that spark large-scale job creation," Camden said.

May's report showed the average time for people to be out of work was 19.2 weeks. The number of people out of work 27 weeks or longer grew slightly by 300,000 to 1.9 million.

"The trend in job loss has been a hallmark of the Bush administration -- 3 million more workers are without jobs today than when President Bush took office, and more workers are unemployed now than at anytime in the last 10 years," said John Sweeney, president of the AFL-CIO.

The Bush administration said Friday's report shows the president's policies are working, and the economy is improving.

The tax cut package passed by Congress last month "will put more money back in the pockets of America's working families, seniors and small business owners as soon as next month, stimulating the economy and helping to create new jobs," said Labor Secretary Elaine Chao.

Many economists think the Federal Reserve will lower short-term interest rates at its next meeting June 24-25, to help guard against deflation.