May Jobs Growth Unexpectedly Strong : demoRATS run for cover in sewers
By JEREMY W. PETERS and DAVID LEONHARDT
Published: June 2, 2007
The American economy bounced back in May, as employers added nearly twice the numbers of jobs they had in April, and the manufacturing sector grew at its fastest rate in more than a year.
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The New York Times
These new readings on the state of the economy, along with other surveys released today showing buoyant consumer confidence and freer spending, helped ease fears that a serious slowdown had begun.
In its monthly survey of national employment, the Labor Department said today that 157,000 jobs were created last month, compared with 80,000 in April.
At the same time, the unemployment rate held steady at 4.5 percent. The percentage of the population that is employed was also unchanged at 63 percent.
The report found that not only did businesses hire more employees in May, they paid workers more as well. Hourly wages for rank-and-file workers rose 3.8 percent over the last year. Still, with oil prices now surging, wage gains have trailed inflation in recent months, causing workers to take an effective pay cut.
The jobs survey was just one of several closely watched economic indicators that suggested April and May were months in which the economy was shaking off the effects of a broader slowdown. Wall Street embraced the news, and stock prices rose.
Consumer confidence rebounded last month from an eight-month low, according to a survey from the University of Michigan. And the Institute for Supply Management said that manufacturing activity rose in May to the highest level since April last year.
Another report from the Commerce Department showed that American consumers picked up the pace of spending in April. Personal spending rose 0.5 percent, compared with a 0.4 percent rise in March. Personal income, however, dipped 0.1 percent after rising 0.8 percent in March.
Meanwhile, inflation fell closer to a level that the Federal Reserve regards as tolerable. A measure of prices in the Commerce Department report that the Fed carefully monitors because it excludes volatile food and energy prices rose 2 percent from April 2006. That was the second consecutive month of a slower increase. In February, inflation advanced 2.4 percent; in March it grew 2.1 percent.
“These reports underscore the resilient nature of the economy,” said Joshua Shapiro, chief United States economist for MFR.
ING Bank in London said in a research note today that the jobs report suggested the economy was on track to rebound later this year after a sluggish start. The Commerce Department said yesterday that growth in the first quarter slowed to 0.6 percent, the slowest in more than four years.
“There is no sign in these data that a softer labor market is undermining the economy, leaving open the prospect for a more buoyant U.S. economy later in the year,” the report said.
The businesses that showed the strongest hiring growth last month were health care (25,300 new jobs), restaurants and bars (34,500) and local governments (16,000).
In all, builders added no new jobs last month. But slight gains by nonresidential contractors were offset by declines in residential construction.
Manufacturing shed 19,000 jobs; retailers cut almost 4,000.
There are considerable uncertainties about the economy’s health, however. Consumer spending was solid in the beginning of the year, but it could weaken if higher gas prices and the slumping housing market test the bank accounts of American households. That could put the labor market in jeopardy, economists said.
“The labor market is not sort of chugging along independently,” said Nigel Gault, chief United States economist for Global Insight. “If housing turns down more steeply and spending starts to weaken, then the labor market will start to weaken.”
In fact, job creation so far this year has been on a see-sawing path, with one month of healthy growth followed by one month of mediocre growth. And inflation has been swallowing the small nominal wage gains workers have received.
The average hourly wage for rank-and-file workers — who make up about four-fifths of the work force — rose 6 cents in May, to $17.30. But this increase trails inflation by a significant amount, economists said.
After peaking in February at an inflation-adjusted $17.44, the real average hourly wage has begun falling again, as it did from 2003 to 2005. In fact, the current economic expansion, which began in late 2001, has had some of the weakest wage growth of any modern expansion. In December 2001, the average real hourly wage for rank-and-file workers was $17.24.
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