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US jobless rate hits 9.4% in May while layoffs slow

(Agencies)
Updated: 2009-06-05 23:45

Many economists believe the jobless rate will hit 10 percent by the end of this year. Some think it could rise as high as 10.7 percent by the second quarter of next year before it starts to make a slow descent. The post-World War II high was 10.8 percent at the end of 1982.

Job seekers wait for the start of the National Capital Region Job Fair sponsored by Virginia Tech University at their branch campus in Falls Church, Virginia, March 10, 2009. [Agencies]

Friday's report "supports the notion that the recession will end this year," Yamarone said. But pain will linger and the jobless rate will move higher. He predicts it will peak at 10.2 percent early next year.

The Fed says unemployment will remain elevated into 2011 given the expectation of tepid recovery. Economists say the job market may not get back to normal -- meaning a 5 percent unemployment rate -- until 2013. Economic recoveries after financial crises tend to be slower, economists say.

Related readings:  US worker productivity may rise on back of job cuts  Healthcare worries keep US workers in 'job lock'  UK graduates face poor job prospects  Latest unemployment soars to 41-month high by joseph li  Unemployment highest since 2005

Evidence has been mounting that the recession is letting up, with fresh signs emerging earlier this week.

The number of people continuing to draw unemployment benefits dipped for the first time in 20 weeks, and first-time claims also fell. Manufacturing's slide is slowing. Builders are boosting spending on construction projects and a barometer of home sales firmed.

Although shoppers remain cautious according to sales results from major retailers, Bernanke and other economists are hopeful that consumers won't return to the deep hibernation seen at the end of last year.

That's when the recession hit with brutal force, causing the economy to contract at a 6.3 percent pace, the most in 25 years. Consumers cut their spending at the time by the most in nearly three decades. Economic activity shrank at a 5.7 percent pace in the first three months of this year, despite a rebound by consumers.

Many analysts believe the economy is shrinking at about a 2 percent pace in the current quarter, and that the economy could return to growth as soon as the third quarter. President Barack Obama's stimulus package should help bolster the economy.

Ripple-effects from General Motors Corp.'s filing for bankruptcy protection -- the fourth largest in US history -- could muddy the outlook, some analysts said. GM said earlier this week it will close nine factories and idle three others indefinitely as part of its restructuring.

The closings, which will take place through the end of 2010, will cost up to 20,000 workers their jobs.

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