Employers in the U.S. hired more workers than forecast last month, signaling the economy is rebounding from the weakest growth in four years.
The 157,000 increase in employment followed a 80,000 gain in April, the Labor Department said today in Washington. The jobless rate stayed at 4.5 percent, close to a five-year low.
More jobs and bigger paychecks are crucial to sustaining consumer spending, which accounts for more than two-thirds of the economy, as house values stagnate and gasoline prices climb. Low unemployment reduces the odds the Federal Reserve will cut interest rates.
``As long as we are still creating jobs, the U.S. economy has a good outlook,'' said Ellen Zentner, an economist in New York at Bank of Tokyo-Mitsubishi UFJ Inc. ``Everything from today's report is good news. Incomes are increasing and that's helping consumers battle higher prices.''
Personal spending rose in April and a measure of prices increased less than forecast, a separate government report showed today. The 0.5 percent rise in spending followed a 0.4 percent increase in March that was greater than previously estimated. The Fed's preferred measure of inflation rose 0.1 percent.
Economists projected payrolls would rise by 132,000 following a previously reported 88,000 April increase, according to the median of 84 forecasts in a Bloomberg News survey. The jobless rate was forecast to hold at 4.5 percent.
Earnings
Workers' average hourly earnings rose 6 cents, or 0.3 percent, after a 0.2 percent increase the previous month. Economists expected a 0.3 percent increase. Earnings were up 3.8 percent from May of last year.
Service industries, which include banking, insurance, restaurants and retailers, added 176,000 workers last month after hiring 119,000 in April, the report showed. Retailers lost 4,900 jobs in May after shedding 24,700 in April.
Payrolls at builders were unchanged after declining 21,000.
Manufacturers' payrolls fell by 19,000 last month after dropping by 20,000 a month earlier. Economists expected factories to eliminate 15,000 positions. The manufacturing workweek fell to 41.0 hours from 41.1 hours and overtime fell to 4.1 hours from 4.2 hours.
Weekly Hours
Average weekly hours worked by production workers rose to 33.9 from 33.8. Economists in the Bloomberg survey had forecast hours would hold at 33.8.
Average weekly earnings rose to $586.47 last month from $582.71 in April.
The unemployment rate has ranged between 4.4 percent, the lowest in five years, and 4.6 percent since September.
Fed policy makers said last month that the job market was still ``relatively tight,'' according to minutes of their May 9 meeting, released this week. Wage growth still posed a ``significant'' risk to inflation, the Fed said. Fed officials also maintained forecasts of a pick-up in economic growth.
AMR Corp.'s American Airlines, the world's largest carrier, last month announced plans to recall as many as 200 laid-off flight attendants to fill jobs left vacant by retirements and other departures. The Fort Worth, Texas-based airline, which returned to profit in 2006 after five years of losses, has also recalled pilots and mechanics.
Adding Workers
Microsoft Corp., the world's biggest software maker, said last month it will expand its Fargo, North Dakota, campus to add space for 575 workers. Microsoft is also in the middle of a $1 billion expansion to its Redmond, Washington headquarters to add space for an additional 12,000 employees.
Slower earnings growth at many companies may restrain hiring in coming months, economists said. First-quarter earnings adjusted for the value of inventories and depreciation of capital expenditures, known as profits from current production, rose 1.2 percent. Profits were up 21 percent last year.
Schaumburg, Illinois-based Motorola Inc., the world's second- biggest mobile-phone maker, said this week it will cut 4,000 jobs, the second round of firings this year, as it works to return to a profit.
There are also signs that the labor market may not have been as strong last year as earlier estimates suggested.
A report this month from the Labor Department, based on tax records from all businesses, showed the economy added 19,000 private-sector jobs in the third quarter. That contrasts with the government's monthly payroll figures, based on a smaller survey, which showed a gain of 498,000 jobs for the period.
Construction
The report showed declines in residential-construction jobs, and more losses may follow in coming months, economists said.
The Commerce Department said yesterday that the economy expanded at an annual rate of 0.6 percent from January through March, down from a 1.3 percent initial estimate the government reported on April 27.
A resilient labor market and signs that business spending is recovering from a slump last year point to gradual improvement in growth, economists said.
The economy will probably expand at a 2.2 percent pace this quarter, and at a 2.8 percent rate by year-end, according to economists surveyed by Bloomberg April 30 to May 8.
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