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Date Posted: 16:45:40 06/07/02 Fri
Author: Lafaux
Subject: Jobless Rate Slid Unexpectedly to 5.8% in May

Jobless Rate Slid Unexpectedly to 5.8% in May
By SHERRI DAY


After rising to its highest level in nearly eight years in April, the nation's unemployment rate unexpectedly slipped to 5.8 percent last month, the government reported today.

But the economy added fewer jobs than anticipated, as businesses remained cautious about hiring in the wake of the recession.

The decrease in the unemployment rate came as the total number of people employed in May rose by 441,000, the Labor Department reported. But the department's household survey of labor conditions is largely viewed as being highly volatile, and economists wondered if the 5.8 percent rate would hold for long.

In April, the unemployment rate rose to 6 percent, and Wall Street economists had predicted that the unemployment rate would rise to 6.1 percent in May.

Economists had also anticipated that businesses outside the farming sector would add some new 68,000 jobs in May. But the government reported an increase of only new 41,000 jobs, and it revised April's growth in nonfarm payrolls down to 6,000, from a previously reported 43,000.

Bob DiClementi, the chief United States economist at Citigroup, described the employment data as "half full, half empty."

"The job market is one of the sectors in the economy that tends to lag economic recovery, and so what we're seeing here is consistent with a lagging gradual improvement in overall employment conditions," Mr. DiClementi said. "To the extent that the numbers are stabilizing after a period of sharp job losses and rising unemployment, we're going through this kind of transitional phase."

The stock market, which has shrugged off much of the week's positive economic data, ignored the employment report and focused instead on Intel's warning that its second-quarter sales would be weaker than previously projected.

After a sharp sell-off in early trading, stocks ended the day with modest losses. The Dow Jones industrial average fell 34.97 points, or 0.4 percent, to close at 9,589.67. The technology-weighted Nasdaq composite index dropped 19.40 points, or 1.3 percent, to 1,535.48. The broader Standard & Poor's 500-stock index slipped 1.62 points, or 0.2 percent, to 1,027.53.

Among the businesses surveyed by the government, the services sector, which added 68,000 jobs last month, was responsible for most of the increase in employment. Most of that growth was a result of an increase of 25,000 jobs in help supply services, better known as temporary employment, which tacked on 126,000 jobs since February. Economists said the continued hiring of temporary workers could be the first sign that companies are beginning to lean toward hiring permanent workers soon.

Engineering and management services also posted job growth, adding some 23,000 new positions in May, with new employees concentrated in management and public relations. Health services also added 16,000 jobs in May.

Other sectors that grew in May included education, as local governments added 26,000 jobs last month.

Job losses continued to be prevalent in the retail sector. Restaurants and bars shed 33,000 jobs, bringing the total decline in the industry this year to 59,000, the government said.

The manufacturing sector also continued to post losses, as employment in factories dropped 19,000 in May. But the job cuts are not as steep as they have been. From March 2001 to February 2002, the sector lost an average of 115,000 jobs a month, the Labor Department reported.

Employment in construction, transportation and public utilities were little changed since last month.

The overall weekly earnings of American workers rose 0.2 percent, to $502.74. In May average hourly earnings rose 3 cents in May to $14.70. For the year, both average hourly earnings and average weekly earnings increased by 3.2 percent, the government said. The average work week for employees was unchanged in May at 34.2 hours. The manufacturing work week was also flat at 40 hours. But factory overtime was up by 0.1 hour, to 4.3 hours.

Economists described the data regarding weekly and hourly earnings as one of the few bright spots in the day's report. But over all, they said, the data did not appear not strong enough to encourage the Federal Reserve's policy makers to raise interest rates when they meet later this month.

"While we're starting to turn up in terms of total labor input, it's still a pretty weak pace of growth," said Peter Hooper, the chief domestic economist at Deutsche Bank North America. "I think the Fed's going to want to see substantial strengthening in the labor market."

He added, "If we get more strengthening, it could make the discussion at the August meeting more interesting."

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