By  on June 9, 2008

WASHINGTON — The U.S. employment picture deteriorated further in May, with the economy losing 49,000 jobs in the month and the unemployment rate rising to 5.5 percent from 5 percent in April — the largest increase since February 1986 — the Labor Department reported Friday.

Department stores lost 14,900 jobs to employ 1.5 million, continuing a pattern of declining employment numbers. Specialty stores gained 1,300 jobs to employ 1.5 million, after cutting 1,000 positions in April.

The manufacturing sector also lost ground in May. Domestic apparel manufacturers trimmed 2,200 jobs to employ 194,800. Textile producers cut 1,500 jobs in May, driven in part by a loss at textile mills that make apparel fabric of 1,100 jobs to 155,000 positions. Textile product mills, which manufacture home furnishing textiles, cut 400 jobs to 152,100 positions.

"Once again, the employment report delivered a curious mixture," said Nigel Gault, chief U.S. economist at Global Insight. "The headline 'Payroll Jobs Decline of 49,000' was roughly as expected, showing a continuing but gradual deterioration in the labor market. The unemployment rate was a shocker, though."

The unemployment jump is probably an overestimate, Gault noted, and unemployment figures are likely to recover a little in the next couple of months, but not enough to bring the rate down.

The cuts in the retail workforce have been driven by cooler consumer demand, said Richard Yamarone, chief economist at Argus Research Corp. Over the last six months, retailers have shed 177,000 jobs, he noted. Broadline retailers especially have struggled.

"Most companies are unsurprisingly managing their staff with respect to economics, opting to cut their biggest and most flexible cost: labor," Yamarone said. "To be sure, thisasteep reduction of staff is beginning to show on the floor. Many department stores are looking ragged with unkempt shelves, cluttered aisles, unsightly piles of returned merchandise. Unfortunately, things may only get worse."

Given the trend of industry consolidation and the number of closures of underperforming stores announced in the department store sector in the last few months, May's drop in workers for the sector was not a surprise, said a spokesman for the National Retail Federation.

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