Job Growth Strong in May; Unemployment Steady

WASHINGTON – U.S. employers added an unexpectedly large 248,000 jobs in May, extending a nine-month hiring spree, the Labor Department (search) said Friday in a report that confirmed a strengthening economy likely to soon bring higher interest rates.

The May tally exceeded Wall Street expectations for 216,000 new jobs. Employment figures for March and April were revised up to reflect the addition of 353,000 and 346,000 jobs respectively. Payrolls have swelled by almost 1 million in the last three months alone.

The cascading evidence of accelerating economic activity is certain to reinforce expectations that Federal Reserve (search) policymakers will ratchet U.S. interest rates up from current 46-year lows when they meet June 29-30 and may prove a boon to election-bound President Bush.

"Clearly, the jobless recovery is behind us," said economist Gary Thayer of A.G. Edwards and Sons Inc. in St. Louis, Mo. "The economy probably does not need as much stimulus ... so the Fed is likely to start raising rates soon."

Nearly 1.2 million jobs have been added since the start of the year, adding fodder for a campaigning Bush to blunt Democratic criticisms fueled by the slow recovery from the 2001 recession.

Hiring last month was widespread, with businesses adding an overall 248,000 new jobs across the economy. Industries that posted the biggest gains included construction, health care, professional and business services and hotels and restaurants.

"What is really key is that every major sector had improvements," said John Silvia, chief economist for Wachovia Securities. "That suggests these gains are sustainable."

The struggling manufacturing sector also is reawakening, adding 32,000 new jobs last month. It was the fourth straight month of payroll increases after almost three years of continuous losses.

The payroll survey by the Bureau of Labor Statistics (search), reflecting the addition of those 248,000 new jobs to business payrolls, is separate from a survey of U.S. households. It is that survey which determines the unemployment rate.

Still, the economy is far from the booming 1990s. Last month, 8.2 million people remained unemployed. While the overall jobless rate stayed at 5.6 percent, it was much higher among blacks, at 9.9 percent and Hispanics, at 7 percent.

The average duration of unemployment rose to 20 weeks last month, up from 19.7 weeks in April. Almost 22 percent of all jobless workers have been without work for 27 weeks or more.

Construction employment rose by 32,000 in May, with 91,000 new jobs added since January. In services, professional and business services added 64,000 new jobs, fueled by hiring increases in temporary employment firms. Hiring at such firms has grown by 14 percent since April 2003.

Hotels and restaurants added 33,000 jobs over the month, and financial services boosted payrolls by 15,000.

But some industries lost jobs, including telecommunications, which shed 5,000 positions last month. Also, there were fewer government jobs last month, as employment in that sector decreased by 27,000.

Reuters and the Associated Press contributed to this report.