Some 300,000 people were out of work in Hong Kong during the three months ending June 30 - translating into a record 8.6 per cent unemployment rate.

The SARS outbreak was blamed for battering an already weak economy - but officials warned the situation was not likely to get better any time soon.

However, economists forecast that unemployment will stabilize in the last quarter of the year.

The seasonally adjusted underemployment rate increased to 4.3 per cent in the April-June period from 3.8 per cent in the March-May period, the latest labour force data from the Census and Statistics Department shows.

The unemployment rate rose more noticeably in the restaurant and hotel, wholesale and retail trade, transport, and amusement and recreational services sectors.

The new graduates leaving school are likely to add more pressure, Stephen Ip, secretary for Economic Development and Labour, said.

But Ip said "there are signs of gradual revival in overall business activity" and he expected improvement in the employment situation in the last quarter.

The tourism industry has seen a pick-up after SARS was brought under control in May.

The number of visitors and hotel occupancy rates have improved over the past few weeks.

In July, there was an average of 80,000 visitors to Hong Kong a day, compared to 40,000 in June and 20,000 in May, Ip said.

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