Hawaii’s unemployment rate edged down to 6.6 percent in May as some businesses cautiously added workers amid signs the economy is improving.

The May seasonally adjusted jobless rate fell by 0.1 percentage point from April and matched the previous low of 6.6 percent reached in March 2009, according to a report from the state Department of Labor and Industrial Relations released yesterday. The unemployment rate topped out at 7 percent last fall as businesses trimmed payrolls and others closed their doors in response to the recession.

"We’re past peak on the unemployment rate. It’s headed downward, but the improvement will be slow, which is the case after a recession," said Leroy Laney, an economics professor at Hawaii Pacific University.

"Jobs are being added in some categories. We’re still losing in some but rate of decline is diminishing," Laney said.

Hawaii’s unemployment rate, the seventh lowest in the country, compared with a national average of 9.7 percent in May.

The number of employed Hawaii residents rose to 595,100 in May from 593,900 in April, while the number of unemployed fell to 41,700 from 42,700, according to the Department of Labor, which gets its data from the U.S. Bureau of Labor Statistics.

Most of the job gains in May were in the construction, other services, and leisure and hospitality categories, according to the report. Job losses were reported in the financial, business, trade, transportation, utilities and government sectors.

Anecdotal evidence suggests that a large number of those hired in recent months have been temporary hires, which is often the case in the early stages of an economic recovery.

"We’re seeing increases across board in temporary hiring," said David Dower, director of business development at Altres Staffing, the state’s largest locally owned employment agency.

The company’s offices on Oahu and the Big Island are the seeing most activity, he added. And the workers most in demand are in the engineering field, Dower said.

"For some reason, companies are looking for engineers, everything from civil to IT. It’s kind of an interesting blip we’ve seen."

Smaller businesses appear to be holding back on hiring until there are clearer signs the economic recovery is firmly established, said Sam Slom, president and executive director of Smart Business Hawaii, an association of small businesses. Slom also is a state senator representing East Honolulu.

He said a series of informal polls the organization has conducted with both members and nonmembers starting last year shows small businesses are still having a tough time.

"Those polls are showing that things are still pretty feeble, that we’re still in intensive care," Slom said.

"There are some pockets of improvements, but the vast majority of businesses I speak with are struggling and not hiring."

Watts Constructors, a Honolulu-based company with operations in three other western states and Guam, said it plans to put off hiring locally until the fourth quarter of this year based on government contracts it is anticipating.

"We’re hoping for signs of commercial life in early 2011, but the project that could make the biggest impact to our industry now would be the light-rail project," said Denny Watts, company president.

"We’re very fortunate that the city and county and federal government have the work that they do, otherwise we’d be in dire straits."

A recent report by a group of University of Hawaii economists predicted that after record-setting job losses, net hiring will begin this year, "building as we move into 2011 and 2012."

"The economic stabilization of the past year sets the stage for a resumption of modest job growth in 2010," according to the report from the University of Hawaii Economic Research Organization.