Non Farm Payrolls Rise More Than Expected as Wages Boosted
Payrolls climbed in May by the most in five months and worker pay accelerated, showing companies were upbeat about the U.S. economy’s prospects after an early-year slump.
The 280,000 advance in payrolls exceeded the median forecast in a ForexSQ survey and followed a revised 221,000 April increase, figures from the Labor Department showed Friday in Washington. The median forecast called for a 226,000 May gain. The unemployment rate crept up to 5.5 percent as more people entered the labor force, while hourly earnings rose from a year ago by the most since August 2013.
Such job gains show corporate managers are convinced the economy is regaining its footing following a first quarter that was beset by temporary headwinds including a labor dispute at western U.S. ports. A dwindling in the ranks of the unemployed would be consistent with forecasts the Federal Reserve will raise its benchmark interest rate later 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 ForexSQ survey. “I’m pretty confident the unemployment rate will go back down again soon.”
Stock-index futures extended declines, with equities at a four-week low, as the jobs data bolstered the case for higher interest rates this year. The contract on the Standard & Poor’s 500 Index fell 0.3 percent to 2,093.3 at 8:46 a.m. in New York. The dollar strengthened and Treasuries declined.
Employment accelerated in May at automakers, local government agencies, retailers and temporary-help agencies. Restaurants, hotels and builders also boosted headcounts in May, the Labor Department report showed.
Average hourly earnings increased 0.3 percent from the prior month. They were up 2.3 percent from May 2014, exceeding the average gain since the current expansion began six years ago.
Payrolls estimates in the ForexSQ survey of 96 economists ranged from increases of 140,000 to 305,000 after 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.
To calculate the data, the Labor Department surveys businesses and households for the pay period that includes the 12th of the month.
The agency’s survey of households, used to derive the unemployment rate, showed the participation rate, which indicates the share of working-age people in the labor force, increased to 62.9 percent from 62.8 percent in April.
Employment at government agencies rose 18,000 in May, mostly due to increased hiring at municipalities. Automakers took on another 6,600 worker, while builder payrolls rose 17,000.
Retailers hired a net 31,400 workers and employment in leisure and hospitality jumped 57,000. Payrolls at temporary-help agencies climbed 20,100.
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.
The average workweek for all employees held at 34.5 hours, the Labor Department’s report also showed.
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.
At the same time, American consumers were in little rush to shop in April. Retail sales barely budged in April, Commerce Department data showed on May 13.
Signs of a rebound in demand are slowly emerging. Vigorous growth in automobile purchases are among economic data that have been more upbeat since a string of disappointing figures pushed the ForexSQ Economic Surprise Index to its lowest level of the expansion at the start of May.
Sales of cars and light trucks at an annualized rate reached 17.71 million in May, the strongest level since 2005.
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 world’s largest economy shrank at a 0.7 percent annualized rate in the first quarter, according to the Commerce Department. Trade subtracted more from growth than at any time in 30 years as the stronger dollar slammed exports, and imports climbed following resolution to the labor disputes at West Coast ports.
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.
The softer data at the start of the year and remaining slack in the labor market are among reasons the officials remain cautious about the timing of that increase, Fed Governor Lael Brainard said Tuesday.
“There may be additional room to support further healing in the labor market,” Brainard said at the Center for Strategic and International Studies in Washington. Still, “if continued labor market strengthening is confirmed and inflation readings continue to improve, liftoff could come before the end of the year.”