U.S. job losses continue, but at a slower rate

Unemployment figures are the key how deep the current global recession will be. Even if there are early signs of economic recovery, continued job losses will change the sentiment and confidence to dark pessimism.

Financial Times reported on the latest U.S. unemployment data as follows:

The US economy shed 345,000 jobs in May, bringing the unemployment rate to a 26-year high of 9.4 per cent, but offering a clear sign that the pace of job cuts is slowing.

The latest non-farm payrolls data were much better than the drop of 525,000 that economists were expecting and was nearly half of the average monthly decline during the last six months. Although the number remains painfully high, it is a sharp improvement from April’s revised 504,000 and offers hope that the economy’s free-fall could be ending.

Much of the May improvement was driven by a rise in education and health service jobs. The manufacturing sector continued to be hit hardest, shedding 156,000 workers, while construction lost 59,000 jobs - nearly half of what was lost in April - and professional and business services lost 51,000.

Since the recession began in December 2007, 7m jobs have been lost and the unemployment rate has climbed by 4.5 percentage points, leaving 14.5m Americans without jobs. Companies have been forced to slash their payrolls to cut costs in the face of falling demand for their goods and services.

Friday’s figures still provide a reminder that the stricken labour force will likely have a longer road to recovery than other parts of the economy. Movements in the labour market tend to trail the rest of the economy by several quarters, and economists predict more job losses and rising unemployment to come.

Last month the Congressional Budget Office said that while the US economy is likely to start growing again in the second half of this year, unemployment is expected to keep rising through 2010 to peak at more than 10 per cent. Barack Obama, US president, has argued that the $787bn stimulus bill will save or create 3.5m jobs by the end of next year.

A batch of recent indicators and a healthier stock market have fostered a new sense of optimism that the US economy is beginning to emerge from the deepest downturn since the Great Depression.