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US economy shows strength with solid job gains in May


In an encouraging trend, the number of people forced to work part-time because they could not find full-time jobs dropped, and wages rose slightly during the month. Photo – AFP

Washington: United States employers created more than 200,000 jobs for the fourth straight month in May, showing the country can still muster solid growth despite the weakness in Europe and other regions.

The United States economy added a net 217,000 positions last month, nearly all from private companies, the Labour Department has reported.

It took the total number of working Americans to a new high, surmounting for the first time all of the 8.7 million jobs lost during the Great Recession of 2008-2009.

But there was still no progress in increasing the very low rate of participation in the workforce, which held at 62.8 per cent, compared to 66 per cent on the eve of the recession.

That suggested that the economy still has far to go to reach full employment. Some 9.8 million people remained on the jobless rolls, slightly up from April.

The unemployment rate held for a second month at 6.3 per cent, after falling sharply from 6.7 per cent in March, mainly due to data showing a large number of people leaving the workforce.

Even so, economists said the May numbers were strong enough to suggest that the economy is picking up speed after the 1 per cent contraction of the first quarter of the year.

Some predicted even stronger job creation numbers in the second half of the year.

"This is a solid report, marking four straight gains over 200,000; that hasn't happened for more than 14 years," said Ian Shepherdson of Pantheon Macroeconomics.

Weak wage growth  
In an encouraging trend, the number of people forced to work part-time because they could not find full-time jobs dropped, and wages rose slightly during the month. Almost all of the May gains were in the private sector, with governments at all levels adding only a net 1,000 workers.

The biggest chunk of new jobs came in the health care and social assistance sector, where almost 55 million positions were added.

The leisure and hospitality sector picked up 39,000 jobs, and the trade and transport sectors also added about that much.

But the construction sector, which economists have hoped would carry the economy forward, remained relatively weak, adding just 6,000 jobs.

Moody's Analytics pointed out that surpassing the pre-recession high for the number of people employed, to reach 138.5 million in May, was still only a modest achievement, given that the population grew by 14 million in the past six years.

"The labour market would need to create twice as many jobs to accommodate the growth in the working-age population, even at the current low labor force participation rate," it said.

Interest rate
Moody's economists noted that wage growth remained weak, and that with many of the new jobs being created in low-wage sectors, people who have dropped out of the jobs market have little incentive to return.

But analysts were split over whether the data was strong enough to press the Federal Reserve to eventually move forward its projections for inflation and when it might begin elevating its base interest rate, now forecast only for mid-2015.

"A broad range of labor market indicators suggests the US economy is still some distance away from full employment, possibly three years, contrasting with the unemployment rate's signal of perhaps one year," said BMO Markets economists.

"Although the latter could spur tighter monetary policy next year, the former points to a slow trajectory, in line with the Federal Reserve's current guidance."

Bond markets took a more aggressive view. US bond yields, which had sagged in recent weeks, picked up, the 10-year Treasury rising from 2.54 per cent to 2.59 per cent. The dollar moved higher against the euro, train at $1.3643 to one euro late on Friday, and against the yen, at ¥102.49.

But US stocks also pushed higher. The S&P 500 finished the day with a 0.46 percent gain to a new record of 1,949.44.

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