US recoups jobs lost in recession as economy gathers steam

June 07, 2014 - 6:50:10 am

WASHINGTON: US employers kept up 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 Labour Department said yesterday, in line with market expectations.  Data for March and April was revised to show 6,000 fewer jobs created than previously reported.

“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,” said John Canally, an economist at LPL Financial in Boston.

May marked a fourth straight month of job gains above 200,000 even though there were fewer gains than the 282,000 seen in April when hiring was still bouncing back from a winter lull.

The nation finally recouped the 8.7 million jobs lost during the recession, with 8.8 million more people in work now than at the trough in February 2010. The working age population has risen 10.6 million since then though and 12.8 million people have left the labour force.

“The trajectory of this recovery is still slower than all other ones,” said Sam Bullard, senior economist at Wells Fargo Securities in Charlotte, North Carolina. “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.”

US stock prices opened up modestly, while yields on US  Treasury debt were little changed.  US dollar was also steady against the yen and euro.

The pace of hiring adds to data ranging from automobile sales to services and factory sector activity that have suggested economic growth this quarter will top a three 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. The unemployment rate held steady at a 5-1/2 year low of 6.3 percent in May even as some Americans who had given up the search for work resumed the hunt.

A measure of underemployment that includes people who want a job but who have given up searching and those working part-time because they cannot find full-time jobs fell to 12.2 percent, the lowest since October 2008.

Economists expect more previously discouraged workers to re-enter the labour force over the course of the year. While that would be a sign of confidence in the labour market, it could slow the decline in the jobless rate.

The report also showed the number of long-term unemployed fell. The average jobless American had been looking for work for 14.6 weeks in May, the shortest stretch in five years and a sharp drop from the prior month.

The return of discouraged job seekers and drop in long-term unemployment will be welcomed by the Federal Reserve, which has cited low labour force participation as one of the reasons for maintaining an extraordinarily easy monetary policy.

The labour force increased by 192,000 people after declining sharply in April. That left the labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, at 62.8 percent.

Average hourly earnings, which are being closely watched for signs of how fast the slack in the labor market is being taken up, rose five cents last month. In the 12 months through April, earnings were up a tepid 2.1 percent, holding in a range that suggests little build-up in wage inflation.