RENEE MONTAGNE, host:
NPR's business news starts with unemployment up to nearly 9.5 percent.
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MONTAGNE: The government released the latest numbers today. The economy lost 345,000 jobs in May, and that's actually much lower than expected. Still, the overall unemployment rate came out higher than many economists had predicted. It's now 9.4.
NPR's Jim Zarroli is covering this story and joins us now. And Jim, I mean bottom line, what - one's lower and one's higher - is it good or bad news?
JIM ZARROLI: Well, this is a labor market. It's still very much feeling the effects of the recession. We had a loss of 156,000 jobs in manufacturing, partly because of the trouble in the auto sector. You know, construction down another 59,000. The economy has lost more than seven million jobs since the recession began.
The important thing here, though, I think, is - and what the headline is likely to be tomorrow morning, is that the 345,000 job loss is still a lot less than we've seen in previous months. On average the economy has been losing, you know, more than 600,000 jobs for half a year, so you know, this is a big drop, but it's sort of - it's bad but it's less bad than it has been.
MONTAGNE: What else does the report tell us about how the jobs market is faring right now?
ZARROLI: You know, I think it's one more kind of piece of encouraging news about the recession, a sign that the, you know, the recession may be bottoming out. It's not over. But almost every day we're seeing these little signs that the worst is over, you know, consumer confidence is up, factory orders were up this week. These are the kinds of little things that economists look for to gauge when a recession is nearing an end, and we've been seeing a lot of them. A lot of economists are now saying, you know, by late summer, early fall we should see the recession end. And in the meantime, businesses are feeling more confident and they're not laying off as fast as they were at, say, the start of - at the end of last year.
MONTAGNE: If things are getting better, what, do you explain the big rise in the unemployment rate in the sense of, you know, they're not laying them off as fast but they're still laying them off?
ZARROLI: It is a big rise. It had been 8.9 percent in April. Now it's 9.4 percent. This is always confusing - you know, how can you say the labor market is improving when unemployment is rising? But the payroll figures, which is what we're looking at this morning, and the unemployment rate, measure different things.
Unemployment is the number of people actively looking for work, and that's affected by a number of things. In May, for instance, you had a lot of college kids graduating and looking for jobs. The government tries to factor in these seasonal fluctuations, but it can be difficult. The other things is, unemployment is a lagging indicator. Businesses only start to hire when they're sure they can afford it. You know, they don't do it right away. So you can have a situation where the economy's improving, but unemployment is climbing, and so you can look for the unemployment rate to keep climbing in the months to come.
MONTAGNE: Does the - going back to your mention of an improving economy - does it suggest that the big stimulus package passed by Congress earlier this year is now doing what it was supposed to do?
ZARROLI: Well, I think the stimulus package is not a big factor, simply because a lot of the money hasn't been spent yet. You could make the argument that all the things the Fed and the Treasury Department have done to stabilize the financial markets are having an effect, and certainly the stock market believes that. It's been up a lot. It was up this morning.
I think the other argument you're going to - you should be hearing now is that, you know, the economy is improving, it may be time for the Fed to start thinking about pulling back. It's put a lot of money into the economy; it needs to reverse course or it risks inflation. We're already seeing a big rise in the long-term interest rates, which is a sign the markets are worried about inflation, so the Fed needs to take some action.
MONTAGNE: NPR's Jim Zarroli, thank you very much.
ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.
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