After a flurry of economic data over the past week that created more confusion than clarity, a jobs report on June 1 helped make the case that the U. S. economy is on solid footing. Employers boosted payrolls by 157,000 in May, the most in two months. The unemployment rate held steady at 4.5 percent.
The newest report on the nation's overall employment climate, released by the Labor Department, suggested that the sluggish spell the economy has been experiencing hasn't severely crimped companies' need for workers. Those with jobs saw modest wage gains last month.
Health care, education, professional and business services, leisure and hospitality, and the government were among the sectors adding jobs in May. But weakness persisted in manufacturing, construction and retailing, partly reflecting fallout from a yearlong housing slump and lingering troubles in the automotive industry. BusinessWeek’s Jim Cooper provides more insight into the jobs report and other economic data in this video.
The new report on labor activity was better than economists were expecting. They were forecasting employers to add just 135,000 jobs in May. They did, however, say they believed the overall unemployment rate would stay at 4.5 percent, considered relatively low by historical standards.
"I'm really encouraged at the willingness of companies to invest" in hiring people and in capital equipment, said Carl Tannenbaum, chief economist at LaSalle Bank. "There has been concern over the economy, concern over profits, which had seemed to dampen the enthusiasm of companies to add to their capabilities but those concerns seem to be lifting. We are seeing better hiring," he added.
Wall Street was encouraged, too. The Dow Jones industrials gained 60 points and the Nasdaq was up 19 points in morning trading.
Employers boosted payrolls by 175,000 in March and by another 80,000 in April, according to revised figures released Friday. Job gains for each of those months were just a tad smaller than previously estimated.
Friday's employment report was encouraging, economists said, because it not only indicated many companies are holding up well to the troubles that have plagued housing and the automotive sectors as well as some economic uncertainties but also that many companies are coping well with the recent rise in gasoline and other energy costs.
Education and health services added 54,000 jobs last month. Professional and business services expanded employment by 32,000. Leisure and hospitality boosted payrolls by 46,000 and the government added 22,000 positions. Those gains help to blunt weakness elsewhere. Manufacturers shed 19,000 jobs, mostly reflecting losses in the automotive industry, and retailers cut 5,000. Construction employment showed no change.
Workers saw modest wage gains; average hourly earning rose to $17.30 in May, a 0.3 percent increase from the previous month. That matched economists' expectations. Over the last 12 months, wages grew by 3.8 percent.
Wage growth is important to workers and supports consumer spending, a major force shaping overall economic activity. The modest increase in wages should ease inflation fears.
Against that backdrop, the Federal Reserve is expected to leave a key interest rate alone when it meets next on June 27-28. That would extend a yearlong breather for borrowers.
Across the country, the job hunt got shorter in May.
The average time the 6.8 million unemployed people spent in their job searches was 16.7 weeks, down from 17.1 weeks in April.
The economy in the January-through-March quarter grew at a rate of just 0.6 percent, its worst showing in more than four years.
Many economists believe the economy in the current April-through-June period rebounded, growing at a pace of around 2.3 percent, which would still mark a sluggish performance.
In other economic news, consumers' incomes dipped in April, but that didn't stop them from spending briskly.
The Commerce Department reported that Americans incomes fell by 0.1 percent in April, a month when the job creation was at its weakest in two and a half years and wage growth slowed. April's income drop followed a robust increase of 0.8 percent in March.
However, consumer spending—a key ingredient to a healthy economy—rose by a strong 0.5 percent in April following a 0.4 percent gain in the previous month.
The spending figure was stronger than the 0.4 rise that economists were expecting. But the income figure was weaker; economists were calling for a 0.3 percent rise.
The report also showed that an inflation barometer closely watched by the Fed—excluding food and energy prices—moderated a bit in April. The measure rose by 2.0 percent over the last 12 months. That was down from a 2.1 percent increase for the 12 months ending in March.