* U.S. nonfarm payrolls rise 175,000 in May
* Unemployment rate increases to 7.6 percent
* Jobless rate up as workers re-enter labor force
* Data keeps Fed debate over monetary stimulus alive
By Jason Lange
WASHINGTON, June 7 U.S. employers 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 United States added 175,000 jobs last month after adding
only 149,000 in April, the Labor Department said on Friday.
The pick up in hiring came despite tax hikes and sweeping
budget cuts earlier in the year. The unemployment rate ticked up
a tenth of a point to 7.6 percent, which economists called
encouraging because more Americans were began to hunt for jobs.
"The labor 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 U.S.
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 one which could be strong enough
by September for the U.S. 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 (or)
early fourth quarter," said Ian Lyngen, a bond strategist at CRT
Capital Group in Stamford, Connecticut.
Officials at the U.S. central bank, who next gather on June
18-19, have intimated they could be close to reducing their $85
billion in monthly bond purchases even though 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 the median forecast
in a Reuters poll of economists, and U.S. stock prices rose
sharply on the report, with the blue chip Dow Jones industrial
average closing up nearly 1.4 percent.
The dollar also firmed and yields on U.S. government bonds
climbed modestly in anticipation of Fed action later this year.
Of economists polled by Reuters after the data, 42 of 48
said they expected the central bank to trim bond purchases
before year-end. Of those, 21 said a reduction would likely
occur in the third quarter; 19 specified September.
Philadelphia Federal Reserve Bank President Charles Plosser
told Reuters the jobs figures showed that fears were overdone of
how hard a tightening of fiscal policy would hit the economy. He
repeated his call for the central bank to start easing up on its
stimulus sooner rather than later.
"We would all like it to be stronger but there's no reason
for us to feel bad about the numbers that came out," he said.
Many analysts expect Washington's austerity drive to slow
the economy to a growth pace of around 1.5 percent in the second
quarter from a 2.4 percent annual rate in the first quarter.
Budget cuts have prompted hiring freezes at government
agencies. Government payrolls declined by 3,000 in May.
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 1 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.
The report added evidence that U.S. factories have felt the
pinch from budget cuts in Europe stemming from the debt crisis.
U.S. manufacturing employment declined by 8,000 jobs last month.
"The politics of austerity still hold the world in a
vise-like grip," said Richard Trumka, president of the AFL-CIO
While total hours worked in the U.S. economy ticked higher,
average hourly earnings were essentially flat. Over the past 12
months, earnings have risen just 2 percent, extending a
years-long trend of lackluster income growth.
The biggest job gains were in professional and business
services, with temporary jobs up 26,000 in a sign employers
might add full-time staff in coming months. The leisure and
hospitality industry also showed strength, as did retail and
One strong economic signal was that the jobless rate rose
slightly because a flood of people entered the workforce.
In May, 420,000 people entered the workforce, defined as a
person either be employed or looking for work. Economists
consider that good news because some of the recent drop in the
jobless rate had been due to discouraged workers dropping out of
the labor pool.
The share of the population in the labor force rose to 63.4
In another positive sign, the government's household survey,
used to calculate the unemployment rate, showed even stronger
job growth than the payroll survey of employers. Those figures,
however, can be volatile month to month.