Bloomberg News
The economic expansion in the United States reached a milestone last month with employment exceeding the pre-recession peak for the first time – almost five years after the recovery began.
The 217,000-job advance in hiring followed a 282,000-job gain in April, figures from the labour department showed. It marked the fourth consecutive month employment increased by more than 200,000, the first time that has happened since early 2000. The jobless rate unexpectedly held at an almost six-year low of 6.3 per cent.
The gain in employment, led by health-care providers and restaurants, was broad-based and pointed to an improvement in business confidence that signalled headcounts would continue to grow. The report also showed that 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 would prompt the Federal Reserve to keep trimming record monetary stimulus.
It’s “a good sign overall – the labour market is still gradually making its recovery,” said Gregory Daco, the lead US economist at Oxford Economics USA in New York who had forecast a gain of 215,000 jobs. “There are some encouraging signs on the wages front. It’s going to be a gradual increase.”
Economists projected the jobless rate would rise to 6.4 per cent as more people entered the labour 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 points.
The participation rate, which shows the share of working-age people in the labour force, held at 62.8 per cent, 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,” said Ward McCarthy, the chief financial economist at Jefferies in New York.
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 last year.
The number of people unemployed for 27 weeks or longer dropped to 34.6 per cent of the total jobless last month, the lowest since August 2009, from 35.3 per cent in April. Those working part-time because the economy was not 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 would prefer a full-time position and people who want to work but have given up looking – fell to 12.2 per cent, the lowest since October 2008, from 12.3 per cent.
The report “argues for the Fed to continue the normalisation process, including the continuing tapering pace of US$10 billion per meeting,” said Mr McCarthy.
Fed officials are watching the labour market as they get closer to completing their bond-purchase programme 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 $45bn and said further reductions in measured steps were 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 also increased.
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, the director of human resources at the company of 509 employees. “Most of the people are employed, which really impresses me. They have jobs, but 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, the chief the US economist at RBC Capital Markets. “It really drives home how painfully slow the process has been.”
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