Policy-makers say worst may be past

By Lewis Krauskopf and Tom Bergin

NEW YORK/LONDON (Reuters) - U.S. employers last month cut the fewest jobs since September and international policy-makers said the worst of the downturn may be over as more positive corporate news popped up around the globe.

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 labour market is beginning to stabilise."

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 labour 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 (9 billion pound) stock buyback program. <.

European stocks finished higher .FTEU3.

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