Strong Job Growth Data Eases Concerns After Winter Dip in Economy

Story image for todays news on economy from New York Times

You could almost hear the sighs of relief.

Worries about the American economy’s momentum were blunted on Friday by the government’s announcement that e mployers added a hefty 280,000 jobs in May, well above the monthly average logged over the last year.

The official unemployment rate ticked up slightly to 5.5 percent as more Americans jumped back into the labor pool and began the job hunt. Hourly wages, which have grown fitfully, rose 0.3 percent last month, possibly helping to lure back some discouraged workers who had been staying on the sidelines.

The new data is likely to buttress the argument that the economy’s modest contraction in the first quarter and other pasty-faced reports were a blip, partly a casualty of the harsh winter, rather than evidence of a more fundamental slowdown.

The return of stronger job growth is also likely to bolster the resolve of Federal Reserve officials who hope to start raising interest rates from their near-zero level later this year.

“This is the best combination of numbers we have seen in many months,” said Tara M. Sinclair, an associate professor of economics at George Washington University and an economist at She was unconcerned about the bump up in the jobless rate because “wages are ticking up and attracting people back into the labor force; we are still seeing strong employment growth.”

Still, as the recovery reaches its sixth anniversary, there are signs that the gains have not been spread evenly.

A broader measure of unemployment, which includes part-time workers who want full-time jobs and those too discouraged to even search, remained at 10.8 percent, a figure that has not dropped as much over the past year as economists had hoped. Although nearly two-thirds of Americans surveyed said they were either “doing O.K.” or “living comfortably,” the rest reported they were “just getting by” or struggling, according to the Federal Reserve’s recently released annual survey on families’ financial well-being.

Americans’ mixed economic fortunes have been sounded as a theme by the growing ranks of candidates entering the 2016 presidential race. Rick Perry, a Republican and a former Texas governor who announced this week, talked about “unleashing economic growth and reviving the American dream.” Rick Santorum, a Republican former senator from Pennsylvania, pledged to restore the “hollowed out” middle class during his announcement a week earlier.

Education and skills have become even more highly prized by employers, experts said. “It’s a tale of two economies, the economy of the unskilled, and the economy of the semiskilled and the skilled,” said Robert A. Funk, chairman and chief executive of Express Employment Professionals, a staffing agency based in Oklahoma City that operates nationally.

There is pent-up demand for those with skills, like machinists, engineers and information and technology workers, he said, but those without that edge are continuing to have a tough time.

“We’re out here on Main Street, not Wall Street,” said Mr. Funk, former chairman of the Federal Reserve Bank of Kansas City. “We get a feel of medium and small companies and their attitudes. They are reticent to hire because they are not sure which way the economy is going to go.”

Investors were jittery, and the yield on the 10-year Treasury note reached an eight-month high of 2.43 percent after the report was published. It closed at 2.41 percent.

The Fed’s assessment in the coming months will carry the most weight, as it considers whether to raise its benchmark rate.

On Friday, William C. Dudley, president of the Federal Reserve Bank of New York, said, “I continue to expect that monetary policy normalization is likely to begin later this year.”

That declaration was more optimistic than some of the concerns recently voiced by Fed officials after a string of lackluster economic reports.

This week, James B. Bullard, president of the St. Louis Fed, said that he expected the economy to improve enough to justify a rate increase this year, but the frail first quarter made everyone doubly cautious.

“We should be and are appropriately talking about how to normalize monetary policy,” Mr. Bullard said. “On the other hand, you’ve got near-term concerns — the first-quarter negative G.D.P. number and maybe some consumption numbers, including retail sales — that look weaker than we had anticipated.”

“I think that will all be transient,” he added.

On Thursday, the International Monetary Fund asked the Fed to hold offraising rates until the first half of 2016 because of disappointing growth and a lack of inflation.

Strong job gains and wage increases through the summer would go a long way toward easing such anxieties.

Some employers were showing their optimism by hiring. Dave Maxheimer, director of human resources at Hagie Manufacturing in Iowa, which builds high-tech farm equipment, said his firm was expanding its 450-person work force by 5 percent, and was most in need of highly skilled technicians to make service calls.

“Now crops are in the ground and everything is starting to go in the right direction,” he said. “We’re sold out into August and building everything to order.”

Thomas E. Perez, the labor secretary, called Friday’s data “undeniably the best report of 2015.” He said that the jobs gains in May were distributed across several sectors including health care, education and leisure and hospitality.

“People don’t go on vacation unless they have some disposable income,” Mr. Perez said. He also noted that more workers were quitting voluntarily “because they have confidence they can get a better job.”

That sentiment was echoed on the ground. Tom Gimbel, chief executive of LaSalle Network, a Chicago staffing firm, said: “We’ve seen permanent hiring kick in in the second quarter. People are now not afraid to make a move. They’ll leave their existing companies for a new job.”

For Mr. Gimbel, the most convincing sign of an upswing in the labor market was missing, however. Employers are still reluctant to convert their temporary hires into permanent workers. “When that’s happened, the economy is killing,” he said, “but we’re not seeing that yet.”

That “good, but” description applied to other elements of the jobs report. The proportion of the working-age population that is employed — which some economists consider a bellwether of how the economy is performing — rose to 59.4 percent. It is the highest point since the recovery began six years ago, though still significantly below its prerecession levels.

Similarly, the labor participation rate inched up to 62.9 percent in May. But it continues to be mired in a historically low range, with millions of workers staying out of the work force.

Consumers appear to remain on guard, choosing to bank their savings from low gasoline prices, for example, rather than spend the money. And daily financial challenges manifest themselves in small ways and large.

Nearly half of respondents in the Fed survey, for example, said they lacked the resources to cover an unexpected emergency that cost $400. Nearly one-third said they had skipped some form of medical care last year because they could not afford it.

Productivity growth, too, has been disappointing, economists say, dragging down overall growth and hampering further wage increases.

Job growth without any gains in productivity “is fine for a month, but it’s not a lifestyle,” said Douglas Holtz-Eakin, president of the American Action Forum, a center-right public policy institute, and a former Congressional Budget Office director. “That is where we get increases in our standard of living.”


Leave a Reply

Your email address will not be published. Required fields are marked *