Employment increased more than forecast in May and the jobless rate climbed from a four-year low as more Americans entered the labor force, showing the world’s largest economy weathered the effects of higher taxes and federal budget cuts.
Payrolls rose 175,000 last month after a revised 149,000 increase in April that was smaller than first estimated, Labor Department figures showed today in Washington. The median forecast in a Bloomberg survey called for a 163,000 gain. The unemployment rate rose to 7.6 percent from 7.5 percent.
The improvement in the labor market is a sign companies are looking beyond fiscal restraint this quarter and are optimistic enough about the prospects for demand in the second half of the year. At the same time, bigger job and wage gains are needed to move Federal Reserve policy makers closer to scaling back record monetary stimulus.
“Things aren’t weakening in the labor market as much as we’d feared,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut, who accurately forecast the gain in payrolls. “The unemployment rate rose for the right reasons. More folks are coming back into the labor market, or coming in for the first time, but more important the economy is able to absorb most of them.”
Stock-index futures rose after the figures, with the Standard & Poor’s 500 Index expiring this month climbing 0.4 percent to 1,628.7 at 8:51 a.m. in New York.
Retailers added jobs in May. Employment also increased at construction companies, education and health services, leisure and hospitality businesses and temporary-help agencies. Manufacturers cut jobs for a third month.
Hourly Earnings
While Americans are finding work, wage gains aren’t picking up. Average hourly earnings were little changed at $23.89 in May after $23.88 in the prior month. They were up 2 percent in 12 months ended in May, the same as in April.
Estimates of 90 economists for May payrolls ranged from increases of 80,000 to 290,000. Employment gains averaged 206,000 a month in the first quarter. The agency surveys businesses and households for the pay period that includes the 12th of the month, and there were five weeks between the April and May survey periods.
The household survey, used to calculate the unemployment rate, showed a 420,000 increase in the size of the labor force, exceeding the 319,000 gain in employment and pushing up the jobless rate.