U.S. employers cut 345,000 jobs last month, the fewest since September and far less than forecast, according to a government report on Friday that was the most definitive evidence the economy’s severe weakness was diminishing.
However, the Labor Department said the unemployment rate raced to 9.4 percent, the highest since a matching rate in July 1983, from 8.9 percent in April. This reading beat the peak in the jobless rate during the 1973-1975 recession that lasted 16 months.
But it was both a surge in new labor force entrants and a drop in employment that pushed the jobless rate up a half-percentage point. The May report showed a jump of 350,00 in the labor force. In April, the increase was just 120,000.
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March and April’s job losses were revised down to show smaller declines of 652,000 and 504,000, respectively, meaning 82,000 fewer jobs were lost in those months than previously reported.
Analysts polled by Reuters had forecast non-farm payrolls dropping 520,000 in May. The unemployment rate had been forecast to rise to 9.2 percent.