U.S. economy keeps chugging out jobs
217,000 jobs created in May, 4th month of employment gains
U.S. employers added 217,000 jobs in May, a substantial gain for a fourth straight month, fuelling hopes that the economy will accelerate after a grim start to the year.
The May figure was down from 282,000 in April, a figure that the government revised slightly down, the Labor Department said Friday. But monthly job growth has now averaged 234,000 for the past three months, up sharply from 150,000 in the previous three.
The unemployment rate, which is calculated from a separate survey, remained 6.3 per cent.
The job market has reached a significant milestone: Nearly five years after the Great Recession ended, the economy has finally regained all the jobs lost in the downturn.
More job growth is needed, though, because the U.S. population has grown nearly seven per cent since then. Economists at the liberal Economic Policy Institute have estimated that 7 million more jobs would have been needed to keep up with population growth.
Pay growth is low
In addition, pay growth remains below levels typical of a healthy economy. Average wages have grown roughly two per cent a year since the recession ended, well below the long-run average annual growth rate of about 3.5 per cent.
In May, average hourly pay rose 5 cents to $24.38. That's up 2.1 per cent from 12 months ago and barely ahead of inflation, which was two per cent over the same period.
One reason for the weak pay growth: Many of the jobs added since the recession ended in June 2009 have been in lower-paying industries. A similar pattern was evident in May: Hotels, restaurants and entertainment companies added 39,000 jobs. Retailers gained 12,500. Manufacturers added 10,000 jobs, construction firms 6,000.
Still, the U.S. has now added more than 200,000 jobs for four months in a row — the first time that's happened since 1999.
"There's no doubt the rate of job creation has accelerated," said Dan Greenhaus, chief global strategist at BTIG LLC. according to Dan Greenhaus, chief global strategist at BTIG LLC. "But there remains a fair bit of slack in the labour market."
TD economist James Marple said there are positive signs of a strengthening recovery in the latest figures.
"This marks the first time since the late 1990s that the economy has generated over 200,000 jobs for four consecutive months. The pace of job growth also remained above the 12-month moving average of 198,000, consistent with the story of increased economic momentum," he wrote in a note to investors.
He also pointed out that people aren't out of work for such long periods. "For the first time since May of 2009, the share of people unemployed for more than 15 weeks fell below the 50 per cent mark (to 49.3 per cent)," he said.
Dismal 1st quarter
Many economists predicted late last year that growth would finally accelerate in 2014 from the steady but modest pace that has persisted for the past four years. But the economy actually shrank in the first three months of this year as a blast of cold weather shut down factories and kept consumers away from shopping malls and car dealerships.
The U.S. economy contracted at a one per cent annual rate in the first quarter, its first decline in three years.
So far, employers have shrugged off the winter slowdown and have continued to hire. That should help the economy rebound because more jobs mean more paychecks to spend.
Most economists expect annualized growth to reach three per cent to 3.5 per cent in the current second quarter and top three per cent for the rest of the year.
Recent economic figures suggest that growth is accelerating.
Auto sales surged 11 per cent in May to a nine-year high. Some of that increase reflected a pent-up demand after heavy snow during the winter discouraged car buyers. But analysts predict that healthy sales will continue in coming months, bolstered by low auto-loan rates and the rollout of new car models.