US employers stepped up hiring last month in a show of economic resilience that suggests the US Federal Reserve could begin to scale back its monetary stimulus later this year.
The US added 175,000 jobs last month after adding only 149,000 in April, the US Department of Labor said on Friday.
The pickup in hiring came despite tax hikes and sweeping budget cuts earlier in the year.
The unemployment rate ticked up a tenth of a point to 7.6 percent, which economists called encouraging because more US citizens began to hunt for jobs.
“The labor market continues to trudge forward,” said Jim Baird, an investment officer for Plante Moran Financial Advisors in Kalamazoo, Michigan.
Even so, the jobless rate remains well above pre-recession levels and last month marked the third straight month that US payrolls increased by less than 200,000.
The report showed an economy still in need of the Fed’s pedal-to-the-metal support, but one which could be strong enough by September for the US central bank to ease up on its bond-buying stimulus, economists said.
“It’s constructive enough to support the notion that bond buying should be curtailed as we go into the late third [or] early fourth quarter,” said Ian Lyngen, a bond strategist at CRT Capital Group in Stamford, Connecticut.
Officials at the Fed, who next gather on Tuesday next week, have intimated they could be close to reducing their US$85 billion in monthly bond purchases even though the recovery is not expected to pick up steam until late in the year when the sting from government spending cuts begins to fade.
Last month’s job growth figure was just above the median forecast in a Reuters poll of economists, and US stock prices rose sharply on the report, with the blue chip Dow Jones Industrial Average closing up nearly 1.4 percent.
Of economists polled by Reuters after the data, 42 of 48 said they expected the central bank to trim bond purchases before year-end. Of those, 21 said a reduction would likely occur in the third quarter; 19 specified September.
Many analysts expect Washington’s austerity drive to slow the economy to a growth pace of about 1.5 percent in the second quarter from a 2.4 percent annual rate in the first quarter.
Budget cuts have prompted hiring freezes at government agencies. Government payrolls declined by 3,000 last month.
Last month’s pace of job growth is right around the average for the prior 12 months. Over that period, the jobless rate fell about half a percentage point and the ranks of the long-term unemployed declined by about 1 million people.
“From a worker point of view, of course, you’d like to see a more robust recovery,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
The report added evidence that US factories have felt the pinch from budget cuts in Europe stemming from the debt crisis. US manufacturing employment declined by 8,000 jobs last month.