U.S. employers maintained a solid pace of hiring in May, returning employment to its pre-recession level and offering confirmation the economy has snapped back from a winter slump.
Nonfarm payrolls increased 217,000 last month, the Labor Department said on Friday. Data for March and April was revised to show 6,000 fewer jobs created than previously reported.
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* Despite decelerating from April's outsized 282,000 gain, when hiring was still bouncing back from a winter lull, May marked a fourth straight month with job gains above 200,000 and an important milestone in the economy's recovery.
* It finally recouped the 8.7 million jobs lost during the recession. Employment has risen by 8.8 million since hitting a trough in February 2010.
* Average hourly earnings, which are being closely watched for signs of how fast labor market slack is easing, rose five cents last month.
* The pace of hiring adds to data ranging from automobile sales to services and factory sector activity that have suggested growth this quarter will top a 3 percent annual pace.
* The economy contracted at a 1.0 percent rate in the first quarter, dragged down by unusually harsh winter weather and a slow pace of inventory building by businesses.
SAM BULLARD, SENIOR ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA:
“This came in largely than expected. We expected broad-based growth across the board. That’s a positive sign on the economic outlook. This seems to be gaining traction and boosts the likelihood of a pickup in growth going forward. On the earnings front, we had a rebound of 0.2 percent last month but year-over-year, it’s up only about 2.1 percent. It’s still depressed on a historical basis. Nothing suggests wage inflation is about to take off. Firms are still controlling the hours worked. The wage aspect is still constrained. Certainly the seasonals were favorable for a strong April number. The non-farm payrolls average of 205,000 is possible for the second half of the year. We do think the economic backdrop is favorable for a hiring environment of non-farm payrolls averaging above 200,000.
"Consumers have been deleveraging and improved their household balance sheets. But they have the capacity to borrow if they choose to. There are a lot of cross-currents out there. There are limitations how high growth will be. We are at 2 percent GDP for 2014 and 2.9 percent for 2015.
"This last recession was the deepest we have seen in the modern era and the subsequent recovery is slowest to reclaiming all the jobs lost. The trajectory of this recovery is still slower than all other ones. That’s not going to change and it’s not fast enough to bring back a lot of the workers who stopped looking anytime soon.”
MARTIN SCHWERDTFEGER, CURRENCY STRATEGIST, TD SECURITIES, TORONTO:
“I think people in the FX market will wait to see what happens in U.S. Treasuries. If we can get that upward move in Treasuries moving even higher on a more sustained basis, then we should see the dollar gaining ground vis-a-vis other currencies in general. I think it will take a few days for the market to digest what has come out from the ECB and the jobs report, and therefore we could see in the interim some caution and no one wanting to take large bets in any one direction.”
VASSILI SEREBRIAKOV, CURRENCY STRATEGIST AT BNP PARIBAS IN NEW YORK:
"The headline number was close to expectations. The tone is positive overall and keeps the three-month trend well-above 200,000. The details of the report were a little more even with hourly earnings higher, and participation steady, and the unemployment rate also steady. So the short-term trend in the jobs market is improving. It's a report that's good for the U.S. economy and good for the U.S. dollar."
RUSSELL PRICE, SENIOR ECONOMIST, AMERIPRISE FINANCIAL SERVICES, TROY, MICHIGAN:
“Actually I think it’s a little bit better than the consensus because I think expectations were declining ever since the ADP report.
“But I think it’s a fairly good report, again, probably one of the most important aspects of it is it shows it shows broad consistency. We’re really only seeing weakness in primary sectors, and that is financial, which is under regulation, and information technology, which is there’s a shortage of workers.
“It’ll be positive, well received (by the market). In this type of low-volatility environment economic data typically is taken on its face value. I wouldn’t say that anything is particularly robust but I would say it is fairly broad-based. Things are starting to feed upon themselves and maybe accelerate a little bit as we move to the second half of the year.”
RICK MECKLER, PRESIDENT, LIBERTYVIEW CAPITAL MANAGEMENT, JERSEY CITY, NEW JERSEY:
“This is part of the mixed news that has dominated markets for the last couple of months. I think at this point the market is less focused on some of these economic numbers - which do show a recovery, although a slow one - and more on the actual top-line numbers of U.S. companies. It’s hard for the market to make any large leaps from here because it has already discounted an economic recovery.
“We’re going to have to wait for the next round of earnings to get any real movement for this market. The seeds are planted, we’ll have to wait and see what grows. The assumption is it’s going to work, based on the prices we have in stocks.”
JOHN CANALLY, INVESTMENT STRATEGIST AND ECONOMIST FOR LPL FINANCIAL IN BOSTON:
“I was looking at this on just an average basis, if you just average up on what is there for April and May now its plus 250,000 and that is above where you were before the harsh winter. So the 12 months ending in November 2013 was plus 205,000 and now the last two months are plus 250,000.
"That suggests the first quarter was an anomaly in terms of what the economy was and we are back to a decent pace of job creation. Overall it’s a pretty solid report. The unemployment rate is still a mess because of the participation rate, nothing much to be concerned about, for the bond market at least, for average hourly earnings.
"So the focus is going to be on the payrolls jobs count which gets you back to that sort of pre-winter average and then some. That is a sign the labor market is tightening up but nothing for the Fed to be concerned about but decent news for those out there looking for a job.”
TODD SCHOENBERGER, MANAGING PARTNER AT LANDCOLT CAPITAL IN NEW YORK:
"This number is not a surprise and should be a rallying cry for the bulls. There's no shock on either side of the tape, but it supports the historical norm of the second quarter typically being the best of the year, and April being a strong month within that quarter. The month-over-month slowing isn't a concern."
STOCKS: U.S. stock index futures rose modestlyBONDS: U.S. bond prices were slightly lowerFOREX: The dollar was little changed against the euro and yen
(Americas Economics and Markets Desk; +1-646 223-6300)