A warning was delivered yesterday that the unemployment rate could top five per cent by the end of the year after recording its first rise in five months. The Census and Statistics Department said the provisional seasonally adjusted unemployment rate for the May-July period was 4.7 per cent, or about 165,000 people, up from 4.6 per cent, or 157,400, for the previous three months. Shops, restaurants and hotels were among the worst-hit sectors. The last unemployment rise was in February, when the rate increased from 4.5 per cent to 4.6 per cent. Yesterday's rise came after Chief Executive Tung Chee-hwa warned at the weekend that the economy would slow further this year. Financial Secretary Antony Leung Kam-chung said he expected the jobless rate - which hit its highest level of 6.5 per cent in February 1999 - to rise further in coming months. 'The current worsening of the unemployment situation is a result of two factors. One is the worsening external environment. Secondly, it's the restructuring of the economy from an industrial to a knowledge economy,' he said. 'The unemployment situation is not too optimistic . . . The jobless rate could rise slowly in the future.' City University economics and finance associate professor Jimmy Fang Zhenmin said the jobless rate could hit five per cent by the end of the year. 'Inward investment has been coming into Hong Kong very slowly, which is reflected by the lacklustre state of the stock and property markets. Only with this influx can Hong Kong become economically active again,' he said. 'Moreover, the fortune of the Hong Kong economy is directly linked to that of the US economy, whose growth has been slowing down despite the US Federal Reserve having cut interest rates six times this year.' Dr Ho Lok-sang, director of the centre for public policy studies at Lingnan University and head of its economics department, said: 'The Government has done all it can within its power to ease the situation, but unless it can generate more jobs in the short-term, I am not convinced there will be a dramatic improvement on the employment front.' The chief executive of the Hong Kong Confederation of Trade Unions, Elizabeth Tang Yin-ngor, said: 'Many workers have already expressed their readiness to work for less pay in exchange for some job security, but clearly employers have taken the view that they will be better off cutting their workforce. 'I fear the situation will continue for the next one to two years and those who manage to hang on to their jobs will be asked to take on more work and suffer longer working hours and more pressure.' Unionist legislator Lee Cheuk-yan, of the Confederation of Trade Unions, criticised Mr Leung's remarks, saying the Financial Secretary was discouraging the public from having confidence in the Government. 'What he is doing is only the management of expectation, rather than management of the problem.' He called on the Government to set up a $10 billion fund to help employers offer on-the-job training for employees. Legislator Chan Kam-lam, of the Democratic Alliance for the Betterment of Hong Kong, said unemployment would not improve in the next two years and most employers he had contacted thought wages in Hong Kong were too high.