Employers in the US stepped up hiring a bit in May in a show of economic resilience that suggests the Federal Reserve could begin to scale back its monetary stimulus later this year.
The US added 175 000 jobs last month after adding only 149 000 in April, the Labour Department said on Friday. The May job growth figure was just above the median forecast in a poll of economists.
The unemployment rate ticked a tenth of a percentage point higher to 7.6 percent, but the rise was driven by more workers entering the labour force, a relatively hopeful sign.
“The acceleration in jobs growth points to further improvement in domestic growth momentum,” Millan Mulraine, the US research and strategy director at TD Securities in New York, said.
Some economists said the data supported the view the Fed might be able to trim its bond purchases as soon as September; others think the Fed might not make a move until next year.
Still, it was the third consecutive month that payrolls outside the farm sector increased by less than 200 000.
“It’s not great, but it’s good. It leaves the tapering talk still on the table,” Steve Blitz, the chief economist at ITG in New York, said.
US stock markets opened higher on the report, while the dollar firmed. Yields on US government bonds rose modestly on the view the Fed, which next meets on June 18 and 19, could begin dialling back bond buys this year.
Officials at the US central bank have intimated they could be close to reducing bond purchases despite modest economic growth, which is not expected to pick up until late in the year when the sting from government spending cuts begins to fade.
Budget cuts have led to hiring freezes at many government agencies, and attrition could be slowly reducing payrolls. Government payrolls declined by 3 000 in May.
After expanding at a 2.4 percent annual rate in the first three months of the year, many analysts expect the economy to throttle back to a growth pace of just around 1.5 percent in the second quarter given Washington’s austerity drive.
About 4.4 million Americans have been unemployed for more than six months, roughly 3 million more than pre-recession levels. The longer workers are out of a job, the greater the risk they become essentially unemployable. That could deal lasting damage to the economy and has lent urgency to the Fed’s efforts to stimulate growth.
Still, May’s pace of job growth is right around the average for the prior 12 months. Over that period, the jobless rate fell about half a percentage point and the ranks of the long-term unemployed declined by about 1 million people.
“From a worker point of view, of course, you’d like to see a more robust recovery,” Rick Meckler, the president of LibertyView Capital Management in New Jersey, said.
Even the increase in the unemployment rate had a bright side. The share of the population in the labour force – which includes people who are either employed or looking for work – rose to 63.4 percent. That was driven by 420 000 workers entering the work force. That is good news because some of the recent drop in the jobless rate has been due to workers leaving the labour force, either because they retired, went back to school or gave up looking for a job.
The poll of households from which the jobless rate is derived showed even stronger growth than the payroll survey of employers, and total hours worked in the economy ticked higher.
At the same time, US factories are feeling the pinch from Europe’s debt crisis, which has sent a chill over the global economy. Manufacturing employment declined by 8 000 jobs last month.
The biggest job gains were in professional and business services, with temporary jobs up 26 000 in a potential sign employers could expand their full-time staffs. The leisure and hospitality industry also showed strength, as did the retail sector. – Jason Lange from Reuters