NEW YORK (CNNMoney.com) -- Job losses slowed dramatically in May, according to the latest government reading on the battered labor market, even as the unemployment rate rose to a 26-year high.
Employers cut 345,000 jobs from their payrolls in the month, down from the revised decline of 504,000 jobs in April.
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This was the fewest jobs lost in a month since last September, when the bankruptcy of Lehman Brothers caused a crisis in U.S. financial markets and choked off credit for many businesses. Economists surveyed by Briefing.com had forecast a loss of 520,000 jobs in May.
There were still widespread job losses, as most sectors of the economy, including manufacturing, construction, retail, and business and professional services posted declines in jobs.
But there were also some signs of growth, notably in education and health services, as well as the leisure and hospitality sector. Nearly one third of industries added jobs during the month, the highest level of gains since last October.
Still, the unemployment rate rose to 9.4% from 8.9% in April. Economists expected unemployment would increase to 9.2%.
It was the highest unemployment rate since August of 1983. And the official unemployment rate only captures part of the pain being felt by job seekers. More than a quarter of unemployed people have been out of work for six months or more, and the number of long-term unemployed reached nearly 4 million, the highest reading on records that go back to 1980.
There were also 9.1 million people who were working part-time jobs because they could not find full-time work or they had their hours cut back. This was also a record high.
When counting people who wanted full-time work who are working part-time, as well as some of the people who are not counted as unemployed because they had stopped looking for work, the so-called underemployment reading rose to a record level of 16.4%
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