U.S. Payrolls Rise 431,000 in May, Jobless Rate Falls to 9.7%

Employers in the U.S. hired fewer workers in May than forecast, showing a lack of confidence in the recovery that may lead to slower economic growth.

Payrolls rose by 431,000 last month after a 290,000 increase in April, figures from the Labor Department in Washington showed today. The gain was smaller than the 536,000 median forecast in a Bloomberg News survey and reflected a 411,000 jump in government hiring of temporary help for the 2010 census. Private payrolls rose a less-than-forecast 41,000. The unemployment rate fell to 9.7 percent as Americans dropped out of the labor force.

Staff reductions at companies such as Hewlett-Packard Co. and Citigroup Inc. indicate a slowing in the labor market that threatens to restrain consumer spending, the biggest part of the economy. Federal Reserve Chairman Ben S. Bernanke said yesterday that unemployment was exacting a heavy toll, showing why economists forecast interest rates will remain low.

“It’s going to be a long haul,” Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado, said before the report. “We really aren’t adding many jobs. We’ve lost some momentum in the economy and final sales clearly aren’t enough to generate job growth.”

Payrolls estimates in the Bloomberg survey of 82 economists ranged from 220,000 to 750,000. Economists surveyed also forecast the jobless rate fell to 9.8 percent last month from 9.9 percent in April. Unemployment reached a 26-year high of 10.1 percent in October. The May figures showed the labor force shrank 322,000.

Federal hiring of temporary workers to conduct the decennial population count probably peaked last month, economists said.

Census Employment

The unwinding of census employment may keep distorting the payroll figures for months as the government dismisses workers when the count is completed. For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010.

The gain in private payrolls followed an increase of 218,000 in April that was revised from 231,000. Excluding all government jobs, employment climbed by 116,000 a month on average in the five years to December 2007, when the recession began.

Manufacturing payrolls increased by 29,000 in May, a fifth straight gain and less than the survey median of a 33,000 increase.

GE Hiring

Fairfield, Connecticut-based General Electric Co., the world’s largest maker of jet engines, power-generation equipment and locomotives, said last month it will increase the number of jobs it plans to add in Michigan to more than 1,300.

The U.S. economy right now is “very good and improving,” GE’s Chief Executive Officer Jeffrey Immelt said in a May 24 interview. Europe’s debt crisis is “solvable” and will not slow the global economic recovery, he said.

Automaker Chrysler Group LLC, controlled by Fiat SpA and based in Auburn Hills, Michigan, will hire 1,100 workers at a Detroit factory that produces Jeep Grand Cherokees and add a second shift.

Employment at service-providers increased 427,000 after rising 228,000. Construction companies reduced payrolls by 35,000 after rising 41,000 in March and April combined.

Bernanke on Employment

Bernanke yesterday said joblessness is among the “important concerns” for the recovery.

“One particularly difficult issue is the continued high rate of unemployment,” Bernanke said at a forum at the Chicago Fed’s Detroit office. “High unemployment imposes heavy costs on workers and their families, as well as on our society as a whole.”

Some companies are still cutting back. Hewlett-Packard Co., the world’s largest personal-computer maker based in Palo Alto, California, this week said it’ll slash about 3,000 jobs over several years. Citigroup Inc. plans to close 376 branches and reduce as many as 720 jobs in the U.S. and Canada.

Average hourly earnings rose to $22.57 in May from $22.50 in the prior month, today’s report showed.

Government payrolls increased by 390,000. State and local governments reduced employment by 22,000, while the federal government added 412,000 jobs.

The average work week for all workers rose to 34.2 hours in May from 34.1 hours the prior month.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 16.6 percent from 17.1 percent.

The number of temporary workers increased 31,000. Payrolls at temporary-help agencies often picks up before companies take on permanent staff.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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