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Economists and others weigh in on the smaller-than-expected decline in nonfarm payrolls and increase in the unemployment rate.

The loss of 345,000 jobs in May — 0.3% of employment — makes this jobs report the second worst in a quarter century not including the current recession, but in today’s economy a loss of only 345,000 jobs is welcome news. –Heidi Shierholz, Economic Policy Institute

The improvement was spread across most sectors with the notable exception of manufacturing, where the 156,000 drop was similar to April’s. But retail, construction and finance losses all slowed. What’s happening here is the end of the post-Lehman panic, which hugely accelerated the pace of losses. But it would be very dangerous to extrapolate this into absolute job gains; why would companies hire? Unemployment horrific, wage gains tanking. Less bad, yes; good, no. –Ian Shepherdson, High Frequency Economics
Such a sharp one-month shift in payrolls coupled with relatively consistent weekly claims data may be a recipe for revision in four weeks, but, for the moment, we’re happy to take this source of economic optimism and run with it. Still, amidst all this recoveryphoria, we prefer to take a more reasoned approach to expectations of improving activity in the coming months… In the coming months, the uncertain outcome from the failure of Chrysler and GM could well pressure manufacturing payrolls further and disrupt the traditional position of manufacturing activity as a leading indicator of output and employment recovery. –Guy LeBas, Janney Montgomery Scott
The reported payroll change for May is considerably smaller than signaled by other labor market indicators… We continue to believe that we are still some time from stabilization in employment conditions, and even further from sustained growth in payrolls. –Joshua Shapiro, MFR Inc.
A case can be made that the economy is decaying at a slower rate in the second quarter but projecting out to a second half recovery still seems to be a stretch. The household data was weaker than the payroll series. House-hold employment was very weak with a 437,000 drop in employment and a 350,000 rise in the labor force, driving the civilian jobless rate up to 9.4%, 02.% above consensus expectations. –Steven Ricchiuto, Mizuho Securities
While the significant moderation in the pace of job losses is a welcome development, the details of the May employment report are a reminder that there is yet a long way to go before labor market conditions can be said to be improving, as opposed to deteriorating at a slower rate. –Richard F. Moody, Forward Capital
Other important employment metrics reveal some disturbing trends in the U.S. labor market. In particular, the aggregate number of hours worked declined by 0.7% from a month earlier, which suggests that even though employers may not be dismissing workers at the pace that they did a few month ago, they continue to reduce the number of hours they work. Additionally, with the bargaining power of workers continuing to wane in the face of the weak labor market conditions, the pace of wage gains is slowing to a crawl, with average hourly wages rising by only 0.1% from a month earlier, while on a yearly basis wages are up by only 3.1% — its slowest pace of increase since November 2005! Overall, this was unquestionably a favorable report as it suggests that the pattern of easing job losses has continued in May. –Millan L. B. Mulraine, TD Securities
This report strengthens the data-based argument that we have been making that the recession may have ended in May or June (in the recession trough month of November 2001, payrolls fell by 292,000 and averaged losses of 152,000 per month in the first three months of recovery). Job losses were much smaller than we anticipated and there were upward revisions to jobs in the prior two months making it clear that the peak rate of job losses was hit in January. Since this degree of slowing in job losses was not suggested by jobless claims, it suggests the rate of layoffs remained high in May but there was a significant pickup in hiring. –RDQ Economics
The report — together with the latest data points from the weekly unemployment claims tally — is consistent with the notion that the pace of deterioration is slowing but we are still a long way from the point of stability in both the labor market and the broader economy. –David Greenlaw, Morgan Stanley
Net revisions for March and April added a net positive 82,000 jobs, a very good sign that the worst of the job losses are behind us and economic recovery is near. I expect GDP growth to turn positive in the third quarter, and the official end of the recession, according to the National Bureau of Economic research, could be called even sooner as the higher frequency economic data starts to indicate expansion. Net payroll revisions tend to be negative as a recession is deepening, but tend to turn positive as expansion ensues. –Scott A. Anderson, Wells Fargo