Jobs Machine Ends Winter Woes as U.S. Payrolls Beat Forecast

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U.S. Adds 280,000 Workers in May, Jobless Rate at 5.5%

The American jobs machine has produced a spring spurt to banish the winter weakness.

Employers added 280,000 jobs in May, the most in five months, further dispelling fears that a first-quarter slowdown would take hold, figures from the Labor Department showed Friday. That followed a revised 221,000 April advance.

Hourly earnings climbed from a year ago by the most since August 2013, while an increase in the number of people entering the labor force caused the unemployment rate to creep up to 5.5 percent from 5.4 percent. The report bolstered the case for Federal Reserve policy makers to begin raising rates this year.

“This only reinforces the view that the economy is a lot healthier than the GDP data imply,” said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, whose projection for a 275,000 gain was among the closest in the Bloomberg survey. “How weak can the economy be when we’re generating this kind of job growth?”

Broad-based employment gains from builders to trucking companies to local governments show hiring managers are confident the economy will regain its footing after faltering early this year. The dollar surged to a 13-year high versus the Japanese yen and Treasuries tumbled.

“A Fed rate hike later this year is still on,” said Thomas Costerg, senior economist at Standard Chartered Bank in New York. “The GDP data had been quite weak in Q1, and the Fed is looking for reasons to dismiss the report. Today’s payroll report to some degree puts the Q1 weakness behind us.”

Dollar, Treasuries

The Bloomberg Dollar Spot Index added 0.8 percent, with the greenback rising to 125.64 yen at 4:03 p.m. in New York. The yield on the 10-year Treasury note climbed to 2.40 percent from 2.31 percent late Thursday. The Standard & Poor’s 500 Index fell 0.1 percent at the close.

The world’s largest economy shrank at a 0.7 percent annualized rate in the first quarter, according to the Commerce Department’s latest report on gross domestic product.

“Although the job market has made considerable progress throughout this recovery, challenges remain for our economy,” Jason Furman, chairman of the White House Council of Economic Advisers, said in a statement. “The President is committed to building on the positive trends through a comprehensive agenda to boost employment and wages for the middle class.”

Landscape architect Lana Denkeler has been looking for work since the end of February, when her contract with the University of Texas sustainability department expired.

Still ‘Hopeful’

While the search has been longer than she’d expected, the 36-year-old said she’s still “hopeful” about finding a job soon and sees demand picking up in her field.

“What I’ve heard from other professionals from my field is that things are really starting to turn around -- more projects are happening, projects that were stalled when the economy collapsed are now getting back under way, and firms, even small ones, are getting more work,” Denkeler said.

The median forecast in a Bloomberg survey of 96 economists called for a 226,000 gain in May, with estimates ranging from 140,000 to 305,000. April was revised from a previously reported April advance of 223,000. Revisions to prior reports added a total of 32,000 jobs to overall payrolls in April and March.

May job growth was driven by a 256,000 jump in the private service sector. Retailers, temporary-help agencies, restaurants, hotels and health-care providers also boosted headcounts in May.

Automakers Hiring

At goods producers, automakers stepped up hiring and payrolls at construction companies rose for a second month.

“This is the best report of 2015,” Labor Secretary Tom Perez said in a phone interview.“The trends are beginning to resemble 2014, which had a, relatively speaking, slow start followed by real momentum throughout the rest of the year.”

Amazon.com Inc. is among companies confident enough in the business outlook to announce hiring plans. The Seattle-based online retailer expects to invest “several hundred million dollars” to build facilities in Ohio, adding more than 1,000 full-time jobs over the next few years, Paul Misener, Amazon.com vice president of global public policy, said May 29.

American workers are being compensated better. The Labor Department said average hourly earnings increased 0.3 percent in May from the prior month, the biggest gain since January. They were up 2.3 percent from May 2014, exceeding the 2 percent gain on average since the current expansion began six years ago.

Participation Rate

The agency’s survey of households, used to derive the unemployment figure, showed the participation rate, which indicates the share of working-age people in the labor force, increased to a four-month high of 62.9 percent from 62.8 percent in April.

Employment at government agencies rose 18,000 in May, mostly due to increased local hiring. Automakers took on another 6,600 workers, while construction payrolls rose 17,000.

The May employment report follows a series of data that show parts of the economy are gradually improving after contracting in the first quarter. Manufacturing improved last month as orders increased at the fastest pace in five months, according to the Institute for Supply Management.

Builders broke ground on 1.14 million homes at an annualized rate in April, the most since November 2007, as the freezing temperatures and snowfall that held back the economy in the first quarter gave way to warmer conditions.

Auto Sales

Signs of a rebound in consumer demand are slowly emerging. Vigorous growth in automobile purchases is among economic data that have been more upbeat.

Sales of cars and light trucks at an annualized rate reached 17.71 million in May, the strongest level since 2005.

For more, read this QuickTake: Full Employment

General Motors Co. last month announced it will spend $1 billion through 2018 to renovate and expand a technology campus in Warren, Michigan, adding 2,600 jobs.

The Labor Department’s jobs report helps Fed officials determine whether they’re meeting the employment goal of their dual mandate. The central bankers have said they’ll need to see steady labor-market progress before raising the benchmark interest rate for the first time since 2006.

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