Payrolls shrink, jobless rates drop in many states

WASHINGTON (Reuters) - The number of people on companies' payrolls shrank in more than half the U.S. states in May, even though the jobless rates in many places continued to improve, Labor Department data released on Friday showed.

The number of employees working for businesses outside of farming decreased in 27 states and Washington, D.C., while it

increased in 22 states.

The largest drop in payrolls was in California, which shed 29,200 jobs, followed by New York with 24,700 jobs, and Pennsylvania with 14,200.

In contrast, the largest increase was in Florida, which gained 28,000 jobs, followed by Ohio with 12,000, and Arizona and Louisiana with 10,100 jobs each.

According to the report, the jobless rates in 43 states and the District of Columbia dropped from May 2010, and rose in only four.

In May, the unemployment rates in 24 states fell from the previous month, while those in 13 states and the District rose.

National employment numbers released earlier this month cast a shadow on the country's economic recovery. U.S. nonfarm payrolls increased a slight 54,000 in May and the country's unemployment rate rose to 9.1 percent from April's 9 percent.

Data at the state level is collected by slightly different methods from the numbers drawn for the national report.

NEVADA'S JOBLESS RATE HIGHEST IN U.S.

Nevada continued to register the highest unemployment rate among the states, at 12.1 percent, followed by California, 11.7 percent.

For most of the recession, Michigan held the highest unemployment rate in the country. Even though the state's rate ebbed over the last year, it still edged up to 10.3 percent in May. Its labor force -- the employable population in the state -- lost 6,000 people over the month.

"The state's labor market situation improved significantly throughout 2010 into early 2011," said Rick Waclawek, director of the state's labor information bureau, in a statement. "However, since February 2011, Michigan's unemployment rate has been essentially flat while payroll jobs declined slightly."

North Dakota again held the lowest jobless rate of 3.2 percent, followed by Nebraska at 4.1 percent, and South Dakota at 4.8 percent. Since the recession began in 2007, the commodity-rich states have held the lowest jobless rates.

"May rates are traditionally lower than April as spring weather more fully arrives and outdoor activities, especially in mining and construction, ramp up," said Michael Ziesch, a research analyst for the North Dakota job service, in a statement.

In May, those states were joined by New Hampshire, where the unemployment rate was 4.8 percent. The "Granite State," currently a battleground for those vying to become the Republican presidential candidate, probably benefited from its shrinking labor force.

According to the New Hampshire labor department, the number of employed residents increased by 7,730 from May 2010, while the total labor force decreased by 2,320 from May 2010.

(Reporting by Lisa Lambert; Additional reporting by Karen Pierog in Chicago and Joan Gralla in New York; Editing by Jan Paschal)