A sharp drop in the pace of job losses in the United States has further boosted optimism that the American economy is reviving and that the worst of its recession has passed.

US employers cut 345,000 jobs in May, the fewest for eight months and a much smaller toll than the 520,000 losses predicted by Wall Street.

In a further fillip for hopes of impending economic recovery, the scale of job losses in the previous two months, March and April, was also revised down sharply, to show that 82,000 fewer jobs were shed than originally reported.

The good news was marred, though, as the figures also showed another steep rise in the American unemployment rate, which climbed to a 25-year high of 9.4 per cent of the workforce last month, from 8.9 per cent in April.

Economists noted that this increase in unemployment was aggravated as more of the US population became active participants in the jobs market, combining with continued job cuts to swell the number of people looking for work.

Analysts said that an upbeat overall message from the data was underlined as all the improvement in last month's numbers was driven by a fall in the number of jobs being lost in the private sector, which shed 338,000 staff — barely more than half the 596,000 total lost in April. In previous months, improvements in the numbers of jobs being lost in America have been artificially flattered by the hiring of temporary public sector workers to research next year's US census. This was not the case in May, when government employment actually fell by 7,000 after a 92,000 April increase.

In a further positive finding, the figures showed that the numbers of temporary jobs being lost in the vast US services sector fell to 7,000 last month, from 55,000 in April.

Paul Ashworth, of Capital Economics, the research consultancy, said: “This is arguably the most encouraging part of the whole report because temporary employment has historically been a leading indicator of permanent employment. This report adds to evidence that the US economy is getting back to where it was before the financial crisis intensified last September.”

Mr Ashworth joined other economists in warning about premature predictions of economic resurgence based on the employment data: “The bottom line is that jobs are still being lost at an unusually high rate, suggesting that the economy is still in recession.”

Ian Shepherdson, chief US economist at High Frequency Economics, the analysts in New York, agreed: “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?”

James Knightley, of ING Financial Markets, the broker, echoed that cautionary view. “While initial jobless claims have been trending somewhat lower and some of the labour demand indicators have been improving, it is unlikely that such a major shift in the rate of job losses as signalled by the payrolls figure is sustainable,” he said.

Christina Romer, chairman of President Obama's Council of Economic Advisers, added that yesterday's figures were consistent with a trend of moderating job losses, but said: “Even as we see things start to stabilise and hopefully grow again, we do know that unemployment tends to lag. So the unemployment rate is going to be high and probably stay high for a while, precisely because that is sort of the normal pattern as we come out of recession.”

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive