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. Steinberg said he expects wages to start dropping in response to the rising unemployment and cost-cutting by employers. So far this year, employment growth has been a bit weaker than the government previously reported, because of annual revised figures issued on Friday. 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.
The new unemployment report had bright spots, however. The 19,000 job losses reflected a rebound in hiring in the vast service sector of the economy, where 70,000 new jobs were created last month. Those new jobs were in education, health, social services and agriculture. The finance and real estate industries also posted noteworthy growth, likely reflecting increased refinancing activity spurred by lower mortgage interest rates and a strong housing market. Construction jobs rose by 31,000 last month after a big decline of 78,000 in April that was blamed on severe weather.