US hiring picks up pace as economy strengthens
Employers in the United States stepped up hiring a bit in May in a show of economic resilience that suggests the Federal Reserve could begin to scale back its monetary stimulus later this year.
The US added 175,000 jobs last month after adding only 149,000 in April, the Labour Department said yesterday.
The pick-up in hiring came despite tax hikes and sweeping budget cuts enacted earlier in the year. The unemployment rate ticked a 10th of a point higher to 7.6pc, but only because more Americans began to hunt for jobs.
"The labour market continues to trudge forward," said Jim Baird, an investment officer for Plante Moran Financial Advisors in Kalamazoo, Michigan.
Even so, the jobless rate remains well above pre-recession levels and May marked the third straight month that US payrolls increased by less than 200,000.
The report showed an economy still in need of the Fed's pedal-to-the-metal support, but which could be strong enough by September for the US central bank to ease up on its bond-buying stimulus, many economists said.
"It's constructive enough to support the notion that bond buying should be curtailed as we go into the late third/early fourth quarter," said Ian Lyngen, a bond strategist at CRT Capital.
Officials at the Fed, led by Ben Bernanke, pictured, have intimated they could be close to reducing the $85bn (€64bn) in monthly bond purchases despite modest economic growth. The recovery is not expected to pick up steam until late in the year when the sting from government spending cuts begins to fade.
The May job growth figure was just above forecasts, and US stock prices rose sharply while the dollar firmed.
After expanding at a 2.4pc annual rate in the first three months of the year, many analysts expect the economy to throttle back to a growth pace of just around 1.5pc in the second quarter due to Washington's austerity drive.
Budget cuts have led to hiring freezes at many government agencies, and attrition could be slowly reducing payrolls. Government payrolls declined by 3,000 in May.
About 4.4 million Americans have been unemployed for more than six months, roughly three million more than pre-recession levels. The longer workers are out of a job, the greater the risk they become essentially unemployable. That could deal lasting damage to the economy, a prospect that has lent urgency to the Fed's efforts to stimulate growth.
Still, May's pace of job growth is right around the average for the prior 12 months. Over that period, the jobless rate fell about half a percentage point and the ranks of the long-term unemployed declined by about one million people.
"From a worker point of view, of course, you'd like to see a more robust recovery," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey. (Reuters)