Firms add 217,000 to May payrolls

Monthly jobless rate remains unchanged at 6.3% in U.S.

AP/DAVID COATES - A Quicken Loans recruiter (left) talks with a job seeker at a Detroit job fair in April. U.S. employers have added more than 200,000 jobs a month for four straight months, the Labor Department said Friday.
AP/DAVID COATES - A Quicken Loans recruiter (left) talks with a job seeker at a Detroit job fair in April. U.S. employers have added more than 200,000 jobs a month for four straight months, the Labor Department said Friday.

WASHINGTON -- U.S. employers added 217,000 jobs in May, the Labor Department reported Friday, a substantial gain for a fourth-straight month, fueling hope among economists that the economy will accelerate after a grim start to the year.

Monthly job growth has averaged 234,000 for the past three months, up sharply from 150,000 in the previous three. The unemployment rate, which is derived from a separate survey, remained 6.3 percent in May. That's the lowest rate in more than five years.

"We're seeing the continuation of solid payrolls gains, which is an accomplishment for the economy," said Laura Rosner, U.S. economist at BNP Paribas in New York.

Friday's report from the Labor Department signaled that the U.S. economy is steadily strengthening and outpacing struggling countries in Europe and Asia. U.S. consumers are showing more confidence. Auto sales have surged. Manufacturers are expanding steadily. Service companies are growing more quickly.

"I don't think we have a boom, but we have a good economy growing at about 3 percent," said John Silvia, chief economist at Wells Fargo. "We're pulling away from the rest of the world."

Investors seemed pleased. The Dow Jones industrial average rose 88.17 points Friday to 16,924.28.

The May figures represent something of a landmark: Almost exactly five years into the recovery, total payrolls have finally surpassed where they were before the recession.

While the addition of nearly 9 million jobs since hiring bottomed out in February 2010 is certainly good news, the number is still far from what is necessary to accommodate new graduates and millions of others who have entered the workforce since payrolls last peaked in January 2008 at 138,365,000 jobs.

Pay growth remains subpar. Average wages have grown roughly 2 percent a year since the recession ended, well below the long-run average annual growth rate of about 3.5 percent.

Unemployment has fallen from a 10 percent peak in 2009 partly for an unfortunate reason: Fewer people are working or looking for work. The percentage of adults who either have a job or are looking for one remained at a 35-year low in May.

Still, the United States is faring far better than most other major industrial nations. Overall unemployment for the 18 countries that use the euro was 11.7 percent in April, though some European nations, such as Germany and Denmark, have much lower rates.

The solid U.S. hiring gain in May might be expected to lower the unemployment rate. But the two figures come from separate surveys. The job gain is derived from a survey of businesses, the unemployment rate from a survey of households. The two sometimes diverge but usually paint a similar picture over time. For May, the survey of businesses found a bigger job gain than the survey of households did.

Average hourly pay rose 5 cents in May to $24.38. That's up 2.1 percent from 12 months ago and barely ahead of inflation, which was 2 percent.

Weak wage growth has limited Americans' ability to spend. That, in turn, has slowed growth, because consumer spending drives about 70 percent of economic activity.

"The sluggishness in wages is the weak link that is preventing the U.S. economy from fully expanding its wings," said Gregory Daco, U.S. economist at Oxford Economics.

One reason pay has lagged: The new jobs added since the recession have been more likely to be part time and in lower-paying industries. That pattern was evident in May: Hotels, restaurants and entertainment companies added 39,000 jobs. Retailers gained 12,500, temporary services 14,300.

By contrast, construction firms added just 6,000, manufacturers 10,000. Those industries tend to be higher-paying.

There are still 2.9 million fewer people working in full-time jobs than when the recession began. And nearly 2.5 million more are working in part-time positions.

Still, the United States has now added more than 200,000 jobs a month for four straight months -- the first time that's happened since 1999.

Many economists say unemployment hasn't fallen far enough yet for wages to rise significantly across the economy. Yet there are some signs that wage pressures might soon emerge. One measure that Federal Reserve Chairman Janet Yellen has cited as reflective of the job market's health is the number of people out of work for more than six months. This figure reached record highs after the recession ended and has declined slowly.

The number of long-term unemployed fell 78,000 to 3.37 million last month, down from 4.4 million a year ago.

"To the extent that there is a surprise in this data release, it is the steady unemployment and participation rates," Ward McCarthy, chief financial economist at Jefferies LLC in New York, said in a research note.

The U.S. economy actually shrank in the first three months of this year as a blast of cold weather shut down factories and kept consumers away from shopping malls and car dealerships. The economy contracted at a 1 percent annual rate, its first decline in three years.

Still, most economists expect annualized growth to reach 3 percent to 3.5 percent in the current quarter and to top 3 percent for the rest of the year.

Information for this article was contributed by Christopher S. Rugaber of The Associated Press; by Victoria Stilwell, Jeanna Smialek and Chris Middleton of Bloomberg News; and by Nelson D. Schwartz of The New York Times.

Business on 06/07/2014

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