Policy-makers say worst may be past

Data showing U.S. nonfarm payrolls fell by 345,000 in May came amid optimistic signals from the International Monetary Fund and the Bank of Japan.

The fall in U.S. jobs was far less both than the expected 520,000 drop and the revised 504,000 reduction in April.

"The light at the end of the tunnel just got a lot brighter," said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. "May's employment report brings clear evidence that the labor market is beginning to stabilize."

Tempering the optimism, however, the U.S. unemployment rate rose to 9.4 percent -- the highest since July 1983 -- due to the job cuts and a surge in new labor force entrants.

U.S. stocks closed slightly higher after a choppy day of trading. The Dow Jones industrials average was supported by Wal-Mart Stores Inc's (WMT.N) new $15 billion stock buyback program. <.

European stocks finished higher .FTEU3.

Even before the data, policy-makers held out hope for the world economy.

"The global economy has not hit bottom yet, but the worst of the slowdown is over," the International Monetary Fund's first deputy managing director, John Lipsky, said in Russia.

Bank of Japan sources said the central bank was considering upgrading its view on the economy because of improved exports and output. The bank said last month the economy was worsening, but its board is expected to weigh whether to upgrade that view at a meeting on June 15-16.