Jobs recovery at least 6 months away

By Nick Zieminski - Analysis

NEW YORK (Reuters) - A surprisingly large jump in the U.S. unemployment rate during May sparked a sell-off in shares of staffing and employment services stocks on Friday, signaling that the length and depth of the current labor market downturn may well be worse than anticipated.

The Standard & Poor's HR Employment Services index was down 3.4 percent in morning trading.

Another several months of job losses are likely, analysts and staffing executives said, as evidence mounts that employers are more reluctant to hire.

But many also cautioned that some bright spots remain, and job losses remain relatively modest when compared with the millions of jobs added during the economic upturn.

The U.S. economy shed jobs for the fifth consecutive month in May, down 49,000 outside the farm sector, and job losses in April and March were wider than initially reported. The unemployment rate jumped to 5.5 percent from 5 percent, its biggest monthly rise in 22 years.

One explanation for the jump in people looking for work, which drove up the unemployment rate, is that more people are returning to the work force as their budgets get crimped by high food and gasoline prices.

"We do see more and more candidates because of gas prices and their inability to easily relocate; they're looking for work, but frankly they need something close to home," said Tig Gilliam, head of staffing company Adecco SA's U.S. operations.

"Costs are going up, so a bunch of people are going back and saying, 'OK, I've got to get serious,'" Gilliam said.

Jon Zion, who heads eastern U.S. operations at specialty staffing firm Robert Half International Inc, agreed.

"As a practitioner in the staffing business, my sense of the economy of what's going on -- energy prices, the housing industry -- has probably forced a population of people to come back into the market."

As more workers look for jobs close to home, so more employers are thinking locally to cope with $4 per gallon gasoline.

Adecco clients are increasingly looking for candidates locally, Gilliam said, rather than doing nationwide searches. Some are offering gas cards to employees or organizing ride sharing and bus programs.

NO RECOVERY YET

A drop in professional payrolls in the government report was a troubling sign, said Scot Melland, CEO of Dice Holdings Inc, which runs jobs web sites focused on the technology and finance fields.

"That could be a leading indicator of a weakening in the labor market overall," Melland said. "We're probably looking at a couple of quarters before we see a change in the labor outlook."