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Unemployment soars to 5.5%
Increase in the jobless rate is the biggest since 1986 as payrolls decline for the fifth straight month.
NEW YORK (CNNMoney.com) -- The unemployment rate took its biggest jump in more than two decades in May as employers once again cut jobs, according to a government report Friday.
The unemployment rate soared to 5.5% from 5% in April. Economists surveyed by Briefing.com had only forecast that the closely watched rate would rise to 5.1%.
It was the biggest one-month jump in unemployment since February 1986, and the 5.5% rate is the highest level seen since October 2004.
A jump of this magnitude, even over a period of several months, is considered a warning sign of a recession. The unemployment rate is now a full percentage point higher than a year ago.
John Silvia, chief economist with Wachovia, said the unemployment rate was distorted by a big jump in teenage unemployment in May, to 18.7% from 15.4%, as the school year ended and teenagers started searching for jobs. And the Labor Department figures were probably underestimating unemployment in the months leading up to Friday's report, he said.
"This report reflects what we should have seen over the last two to three months," said Silvia.
The Labor Department also reported a net loss of 49,000 jobs in May, compared to a revised loss of 28,000 jobs in April. That was a touch better than economists' forecast of a loss of 60,000 jobs, but it marked the fifth straight month that the economy has lost jobs.
Overall, the economy has shed 324,000 jobs this year, the worst start to a year since 2002, when the nation was still struggling with the aftereffects of a recession.
The job losses in the payroll report were widespread, as the battered construction industry lost 34,000 jobs and manufacturers cut 26,000 jobs out of the nation's factories. But the service sector also saw job losses in many sectors, as retailers trimmed 27,000 jobs. The catch-all business and professional services categories took a 39,000 job hit.
"The business and professional has to be a focus of concern. The job losses have broadened out," Silvia said. "Those are generally good-paying jobs. This is a clear sign the weakness is spreading beyond the construction and manufacturing."
Part of that business and professional services decline came from a 30,000 cut in temporary jobs, bringing losses in that sector to 106,000 so far this year. Tig Gilliam, chief executive of Adecco Group North America, the unit of the world's largest employment firm, said that cut is another indicator about widespread concern among employers.