Job losses slowed across much of the country last month – but not in California.

In May, the state's payrolls shrank at the fastest rate since February, wiping out 68,700 jobs, including more than 14,000 in the public sector, according to figures released Friday. Employment fell across all major sectors of the economy except health care, pushing the jobless rate to a modern record of 11.5 percent.

Economists ticked off a familiar list of causes, from the housing bust and the contraction of the financial sector to a state budget crisis that's soaking up federal stimulus dollars meant to goose the economy.

Beyond the employment numbers, though, they pointed to some reasons for optimism. Leading economic indicators – like consumer confidence and building permits – were up in May. Home sales are strengthening. A UCLA forecast this week predicted the California economy will grow slightly in the second half of the year.

Still, "There's no sugar-coating the May (employment) report," said Stephen Levy of Palo Alto's Center for Continuing Study of the California Economy.

The real estate collapse in particular continues to weigh on California's economy, Levy said. "It's where we were really much worse than the nation."

The nation lost 345,000 jobs in May, down from 504,000 in April and more than 650,000 in February and March.

One sign of despair among California job-seekers: The state's work force – the number of people employed or actively looking for a job – fell by 105,000 in May, the biggest monthly drop in 33 years of record-keeping.

California's labor force had grown 19 of the last 20 months – a sign that spouses, children and domestic partners have been trying to pick up the slack as family members lose jobs.

May's work force drop is so large that state officials think it might be a statistical blip. But if it's roughly accurate, it signals that large numbers of the unemployed are giving up the job hunt. Howard Roth, chief economist at the state Department of Finance, said it usually doesn't take so long for a recession to start pushing people out of the work force.

"They weren't easily discouraged this time," Roth said.

Friday afternoon at the Folsom Boulevard office of the Sacramento County Department of Human Assistance, Trista Treaster was just starting her search. On Monday, the mother of five lost her job teaching children with disabilities for a care provider that contracts with the state.

Treaster's husband, Neal, a tile layer, has been out of work nearly a year. Trista said she'd take almost anything.

At the county's "job seekers' boot camp," the Rancho Cordova couple balanced their 4-month-old twins and worksheets and binders designed to sharpen their networking and interviewing skills.

"Everybody's looking for work – from the slacker to the hard worker," Neal Treaster said. "I'm learning things now that I had no clue about."

Even those charged with helping job seekers can end up holding pink slips.

"I found out last Wednesday," said Stephanie Knowles, 30, a county communications officer working one of her final shifts with the Department of Human Assistance. At the Folsom Boulevard office on Friday, Knowles was trying to practice what her agency preaches.

"You can't let negativity get to you," she said. "Push through, you will get that job."

In the May jobs report, the four-county Sacramento region fared better than the state as a whole, with the nonfarm payroll dropping by just 300 positions. The unemployment survey measured the jobless rate at 11.1 percent, up 0.3 percent from last month but shy of March's record 11.5 percent.

Layoffs and hires were scattered around the local economy, according to state Employment Development Department data. About 900 scientific and technical jobs disappeared, a 2 percent drop. Employment in the construction sector, down 23 percent from a year ago, declined by 300 positions. Retailers added 600 jobs. And state government rolls actually grew by 300, or 0.3 percent.

The state budget crisis looms over the local economy. Gov. Arnold Schwarzenegger has proposed laying off 5,000 state employees to help address a $24.3 billion deficit. State government employs about 113,000 people in the Sacramento region.

Yet, in an impromptu interview on Capitol Mall on Friday afternoon, EDD Director Patrick Henning seemed surprisingly upbeat.

Henning, who had been smoking and chatting with EDD employees outside his agency's headquarters, said he feels that the unemployment numbers are "bottoming out."

A close examination by his analysts of the state's construction sector, for instance, gave him some hope, Henning said.

"If things are getting worse, I would expect more layoffs of heavy equipment operators in the construction sector – and it wasn't there," Henning said. "That might be a good sign."

Call The Bee's Jim Downing, (916) 321-1065. The Bee's Phillip Reese and Andrew McIntosh contributed to this report.