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U.S. Adds 280,000 Jobs in May, More Than Expected

U.S. employers added a solid 280,000 jobs in May, showing that the economy is back on track after starting 2015 in a slump.
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/ Source: The Associated Press

U.S. employers added a robust 280,000 jobs in May, showing that the economy is back on track after starting 2015 in a slump.

The Labor Department said Friday that the unemployment rate ticked up to 5.5 percent from 5.4 percent in April. But that occurred for a good reason: Hundreds of thousands more people sought jobs in May, and not all found them.

“Even though the unemployment rate bumped up slightly, the labor force participation rate bumped up, and we wanted that number to go up,” said Harry Holzer, a professor of public policy at Georgetown University. “Across the board, I view this as a very positive report.”

Last month's strong job growth suggests that employers remained confident enough to keep hiring even after the economy shrank during the first three months of the year.

The government also revised up its estimate of job growth in March and April by a combined net 32,000.

“It was a very solid report, better than I had anticipated,” said Mark Zandi, chief economist for Moody’s Analytics.

Economists also were pleased to see job growth across most sectors of the economy. Construction and health care companies the drove the May job growth.

“Early on in the recovery there was a fear that [growth was] concentrated in low wage jobs,” Holzer said. “As a recovery matures, you want to see it in other sectors, too,” he said. More solid middle-income jobs in construction and health care along with gains in the high-paying professional services sector confirm that the economy is strengthening.

On the negative side, persistently cheaper oil led energy companies to shed workers for a fifth straight month. “Lower energy prices are very good for economy but the pain is very front-loaded,” Zandi said.

The fact that this weakness was more than offset by gains in other industries was a good sign, though, Zandi added. “Despite losses in the energy industry due to the collapse in oil prices, the rest of the economy’s creating a boatload of jobs,” he said.

Still, average hourly wages rose only 2.3 percent from a year earlier. Although this month’s eight-cent increase for the average hourly pay for workers translates into a decent wage growth number on an annualized basis, the recovery has been characterized by lackluster wage growth so far.

“If we could sustain that kind of growth, then workers would be starting to see real wage increases beyond what they’ve seen in this recovery so far,” Holzer said of this month’s increase.

Tepid pay gains has been a persistent problem for the economy. Over the past three months, the economy has added an average of 207,000 jobs, a decent gain though lower than last year's average of 263,667.

“The wage component is one of the unspectacular aspects of this,” said Mark Hamrick, Washington bureau chief at Hamrick said that although the employment cost index has been climbing, that metric includes things like higher health insurance costs — which doesn’t help retail consumer spending. “The problem is that take home pay is also very important,” he said.

Consumers, the main driver of the U.S. economy, remain fairly cautious. Factory orders have dropped. But Friday's solid jobs report could help confirm the economy's vitality.

Auto and home sales are accelerating despite otherwise slow-spending consumers. More big employers, such as Wal-Mart, have unveiled pay hikes. Those factors could power faster growth, fuel job gains and boost wages. If they do, a broader economic recovery than the one that's existed in the six years since the Great Recession officially ended could emerge.

-- Martha C. White and the Associated Press contributed to this report.