U.S. unemployment rate dips in May
May's unemployment rate was down 0.1 percentage point from April's 2 1/2-year high of 4.5 percent, the Labor Department said yesterday. The decline surprised analysts but did not boost optimism that the worst economic days are over.
"There are clouds on the horizon," Labor Secretary Elaine Chao said.
Though fewer people seeking jobs were out of work last month, businesses overall cut 19,000 jobs, following an even bigger reduction of 182,000 workers in April. The April cut was the biggest since the country struggled to pull out of recession a decade ago.
Manufacturing companies shed 124,000 jobs last month, the largest payroll reduction so far in that sector, which has lost almost a half million jobs this year.
Manufacturing "still does not appear to have hit bottom," said Dean Baker, an economist at the Center for Economic and Policy Research. "But equally important is the fact that there is very little strength elsewhere to offset this weakness."
The National Association of Purchasing Management said yesterday that its factory index continued to show recession conditions in manufacturing with a reading of 42.1 in May, down from 43.2 in April. Any reading below 50 is an indication that manufacturing is contracting.
Private economists agreed that the jobless rate will resume rising in the months ahead. Bruce Steinberg, Merrill Lynch chief economist, predicted the unemployment rate will hit 5 percent by the end of the year.
So far this year, employment growth has been a bit weaker than the government previously reported because of annual revised figures issued yesterday.
"The bottom line is that employment conditions are still deteriorating," said Mark Vitner, First Union vice president.
That concerns analysts because continued layoff notices could force consumers to cut spending and tip the economy into recession. Consumer spending accounts for about two-thirds of the nation's economic activity.
Many economists predict the Federal Reserve will trim interest rates for a sixth time when it meets at the end of the month, though the cut could be just a quarter-point instead of the previous five reductions of a half-point each.