Employment Reaches Milestone in Topping U.S. Pre-Recession PeakVictoria Stilwell
The economic expansion in the U.S. reached a milestone in May with employment exceeding the pre-recession peak for the first time -- almost five years after the recovery began.
The 217,000 advance in hiring followed a 282,000 gain in April, figures from the Labor Department showed yesterday in Washington. It marked the fourth consecutive month employment increased by more than 200,000, the first time that’s happened since early 2000. The jobless rate unexpectedly held at an almost six-year low of 6.3 percent.
The gain in employment, led by health-care providers and restaurants, was broad-based and pointed to an improvement in business confidence that signals headcounts will continue to grow. The report also showed incomes climbed, the ranks of the long-term unemployed shrank and businesses took on more full-time help, evidence of the type of progress that will prompt the Federal Reserve to keep trimming record monetary stimulus.
It’s “a good sign overall -- the labor market is still gradually making its recovery,” said Gregory Daco, lead U.S. economist at Oxford Economics USA Inc. in New York, who forecast a gain of 215,000 jobs. “There are some encouraging signs on the wages front. It’s going to be a gradual increase.”
Stocks rose, sending equity benchmarks to records. The Standard & Poor’s 500 Index climbed 0.5 percent to close at 1,949.44 in New York.
The median forecast in a Bloomberg survey of 92 economists projected payrolls would rise by 215,000. Estimates ranged from increases of 110,000 to 350,000.
Economists projected the jobless rate would rise to 6.4 percent as more people entered the labor force. The workforce did climb by 192,000, and almost as many found jobs. It had plunged by 806,000 in April, which helped reduce joblessness by 0.4 percentage point.
The so-called participation rate, which shows the share of working-age people in the labor force, held at 62.8 percent, matching the lowest since March 1978.
“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. Movements in participation have been erratic and confusing, making forecasting the jobless rate difficult, he said.
The survey of households, from which the jobless and participation rates are derived, also showed the number of discouraged workers -- those who are no longer looking for a job because they think none is available -- dropped to 697,000 last month compared with 780,000 in May 2013.
The number of people unemployed for 27 weeks or longer dropped to 34.6 percent as a share of the total jobless in May, the lowest since August 2009, from 35.3 percent in April. Those working part-time because the economy wasn’t strong enough for them to find a full-time job fell by 196,000 to 7.27 million.
The underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want to work but have given up looking -- fell to 12.2 percent, the lowest since October 2008, from 12.3 percent.
The report “argues for the Fed to continue the normalization process, including the ongoing tapering pace of $10 billion per meeting,” said McCarthy.
Fed officials are watching the labor market as they get closer to completing their bond-purchase program later this year and start considering the timing of the first interest-rate increase since 2006. The Fed’s Open Market Committee has pared its monthly asset-buying to $45 billion and said further reductions in measured steps are likely.
Employment in health services climbed by the most in nine months, while restaurants took on 31,700 more workers. Payrolls at factories, business services and retailers increased as well.
Hagie Manufacturing Company, a farm equipment producer in Clarion, Iowa, is hiring engineers and people to service machines.
“There’s not the desperation there was” among job applicants, Dave Maxheimer, director of human resources at the company of 509 employees, said in a telephone interview. “Most of the people are employed, which really impresses me. They have jobs, they’re looking to better themselves at a company with room for growth.”
The increase in payrolls put total employment beyond its peak of 138.4 million reached in January 2008, one month after the start of the deepest recession since World War II. The economic slump ended and recovery began in June 2009.
“It’s taken an extremely long period of time to gain back all of those jobs, much longer than any other cycle,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC. “ It really drives home how painfully slow the process has been.”
Rachel Merry, 24, is among those seeing the improvement in the labor market first hand. She had been casually looking for a more challenging job for the last few months while working in sales at a catering company. She contacted Trak Services in Washington, D.C. to see if the staffing company had any clients with positions that might suit her. She started working for the firm last week.
“The interviewer kind of threw me a curve ball at the end of the meeting” by suggesting she might be a good fit for an internal position, said Merry, who lives in Arlington, Virginia. The new position “has everything that I was looking for.”
The employment report also showed average hourly earnings rose 0.2 percent to $24.38 in May from $24.33 the prior month. They were up 2.1 percent over the past 12 months.
Even after a slow start in January, employment has climbed by about 214,000 each month on average this year. If the pace is sustained for the remainder of the year, it would mark the fastest-growing labor market since 1999, when the economy added about 265,000 jobs on average as companies stepped up hiring to prepare computer systems for the threat of the so-called Year 2000 bug.
The pickup in job growth is further evidence that the economy is poised to strengthen after an unusually harsh winter. Gross domestic product fell at a 1 percent annualized rate in the first quarter, the weakest reading since the same three months in 2011, according to Commerce Department figures. Still, data this week showed factories and service producers are more upbeat.
The Institute for Supply Management’s non-manufacturing index rose to a nine-month high in May, while its gauge of manufacturers was the strongest this year. Resilient demand is boosting optimism among automakers such as Ford Motor Co. and General Motors Co.
Autos sold in May at a 16.7 million annualized rate, the strongest since February 2007, according to data from Ward’s Automotive Group.
“The incoming U.S. indicators are consistent with the substantial rebound in growth for the current quarter,” Emily Kolinski Morris, senior U.S. economist at Ford, said on a June 3 sales call. Manufacturing has picked up and “the labor market continued its gradual recovery. These incoming indicators coupled with the supportive policy backdrop should provide positive momentum for the economy.”