More signs of recovery in Mass.

The state’s business climate is poised to grow weakly in the second half of the year after the pace of decline slowed sharply in the second quarter, the University of Massachusetts reported yesterday.

The state economy shrank at a 1.6 percent annual rate in the second quarter, which ended June 30, after contracting at a 4 percent rate in the first quarter, according to UMass. The US economy shrank at a 1 percent annual rate in second quarter, compared with a revised 6.4 percent rate of contraction in the first, the Commerce Department said yesterday.

The Massachusetts economy, which has been shrinking for a year, “appears to be at or near the bottom’’ and “will begin to expand (or may have already begun to expand) this summer,’’ UMass said in its report. UMass projects the state economy will grow at an annual rate of just below 1 percent in the next six months.

That growth rate won’t be strong enough to stop unemployment from rising as employers meet increasing - but weak - demand by improving productivity of existing workers rather than hiring new ones, said Alan Clayton-Matthews, the UMass-Boston professor who prepared the report. The state’s unemployment rate hit 8.6 percent in June, the highest rate in nearly 17 years, and several economists expect it to exceed 9 percent when it peaks in 2010.

“The Massachusetts labor market is still suffering, and job losses are expected throughout the second half of the year,’’ Clayton-Matthews said. “However, the pace of job loss should decline significantly.’’

The rate of job losses has already begun to slow. In the second quarter, the state shed an average of 2,600 jobs a month, compared with more than 11,000 a month in the first quarter, according to state labor statistics. First-time claims for unemployment benefits plunged to fewer than 45,000 in June after peaking above 60,000 in March, said UMass.

The diminishing rate of job losses is among several indicators that suggest the state economy has begun a recovery. Consumer and business confidence are on the rise as are stock prices of Massachusetts companies. Automobile sales taxes were also up in June, a sign that auto sales have picked up, while the technology sector appears to be turning around, Clayton-Matthews noted.

Still, the economy remains weak, and, for the time being, indications of a recovery should be viewed as “tentative,’’ Clayton-Matthews said.

Earlier this week, economists pointed to improvements in June home sales as one of several indicators that the Massachusetts economy may have hit bottom and begun a recovery. And yesterday, the Federal Reserve issued its survey known as the “Beige Book,’’ in which New England retailers reported better sales, with many believing the sector is “past the bottom.’’

Robert Gavin can be reached at rgavin@globe.com.