Jobless Rate Up Despite Some Hints of Recovery : Economy: May’s 6.9% level is worst since 1986, but other data, such as payroll survey, suggests rebound.

The nation’s unemployment rate jumped to 6.9% of the work force last month, the government reported Friday, but the economy also began to create jobs for the first time in almost a year, suggesting that the recession finally may be ending.

The May jobless rate--up from 6.6% in April--was the highest since November, 1986. The unemployment rate in California--which is far more volatile because the state survey is so small--rose to 7.7% in May, from 7.4% in April, returning to the level it had reached in March.

At the same time, however, the Labor Department’s monthly survey showed that payroll employment nationally edged up by 59,000 after declining for most of the past year--a signal to economists that the long awaited economic recovery finally may have begun.

The Labor Department conceded that the two statistics seemed contradictory, but pointed out that the previous month’s figures had been skewed by some technical factors and that the April and May numbers together pointed to the same--essentially positive--trend.

In testimony before Congress, Janet L. Norwood, commissioner of the Bureau of Labor Statistics, told lawmakers that the bottom line is that the labor market “is better today than it was earlier in the year.”

Although a 6.9% unemployment rate was certain to be politically uncomfortable for the White House, the Bush Administration appeared to be relatively sanguine about the May report.

White House Press Secretary Marlin Fitzwater conceded that the sharp jump in the jobless rate was unfortunate, but he said other economic indicators--such as retail sales--show that the economy is rebounding.

“We still believe the recession is ending and we’re on the road to recovery,” Fitzwater said.

But some analysts were cautious about how strong the recovery might be. “This may mark the end of the recession . . . but questions remain,” said Allen Sinai, economist for the Boston Co., a New York investment firm.

“It probably will be sustainable for a while--but the risks of fizzling out remain high,” Sinai said. “The odds are it will be much weaker than the average postwar recovery.”

Perversely, perhaps, the suggestion that the economy may be strengthening set Wall Street worrying about the threat of renewed inflation. The stock market fell moderately, with the Dow Jones industrials average dropping 18.12 points to 2,976.74. Bond prices also fell.

Most economists share the view that the recession is coming to an end and the economy is entering a recovery. Federal Reserve Board Chairman Alan Greenspan said earlier this week that an upturn already has begun--although he conceded it could prove to be a weak one.

The increase in the size of industry payrolls was by far the most significant--and reliable--figure in Friday’s unemployment report.

Payrolls in manufacturing industries, buoyed by the return of laid-off workers in the auto industry, rose during May after a string of large declines. Construction jobs also rallied. And jobs in the transportation industry rose for the first time since December.

A companion survey, which estimates the number of persons holding jobs throughout the entire economy, showed total employment down by 805,000 in May, after a 640,000-job gain in April. Again, however, economists said both figures appeared to have been skewed.

The overall unemployment rate is calculated by surveying the labor force--that is, both the number of job-holders and the number of people who say they are looking for work--and calculating the percentage that seems unable to find jobs.

By this measure, the number of people out of work soared by 366,000 in May to a new level of 8.64 million. By contrast, overall unemployment fell by 298,000 in April to 8.27 million.

Economists say economic statistics frequently are erratic toward the end of a recession. Over the last few weeks, some indicators have shown improvement while others have appeared to worsen.

“The economy is trying to make a recovery, and what we see here is a logical extension of the rebound in retail sales we saw in February and the increase in housing sales that started in March,” said Roger Brinner, an economist for DRI/McGraw Hill in Lexington, Mass.

Friday’s report showed that the increase in unemployment in May was spread throughout all major categories of workers, offsetting declines posted the previous month.

Jobless rates for adults, teen-agers, whites and Latinos remained essentially unchanged. But the unemployment rate for blacks continued to soar, rising to 13% in May, up from 12.6% in April.

The Labor Department reported that the overall unemployment rate has risen 1.4 percentage-points since the recession began in July of last year. The jobless rate then was only 5.5%--a level that many analysts regard as at or near full employment.

Economists say the past year’s recession has been caused primarily by cutbacks in spending stemming from the forced writedown of assets in the face of slumping real-estate markets and the collapse of the junk-bond market.