Good News for the Economy
U.S. employers added a robust 280,000 jobs in May, well ahead of forecasts, showing that the economy appears to be back on track after starting 2015 in a first quarter slump according to economists.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 Largest Growth was in construction, health care, and in manufacturing sectors related to both. Oil led energy companies were at the top of the employer list that lost jobs.
Then why did the Unemployment Rate tick up from 5.4 percent to 5.5 percent? Simple: Hundreds of thousands more people sought jobs in May, many who had dropped out of the labor market previously, and not all found them. We are talking about increases in the Labor Participation Rate- a weakness in the overall recovery from the Great Recession. Over the past 12 months, around 3 million jobs have been added.
Of particular importance: 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.
Auto (up 18 percent) and home (up 24 percent) sales are accelerating despite otherwise slow-spending consumers. Americans bought 1.64 million cars and trucks in May, the most since July 2005. More big employers, such as Wal-Mart, have unveiled pay hikes.
Employers seem to be envisioning a healthier economy, given that the weekly number of people applying for unemployment benefits — a proxy for layoffs — has remained under a historically low 300,000 for more than four months. By holding on to nearly all their workers, businesses are ensuring that they will have the capacity to respond to greater customer demand.
Not Such Good News
1) Average hourly wages rose only 2.3 percent from a year earlier. Tepid pay gains has been a persistent problem for the economy. While a number of high profile employers have increased wages substantially in recent months (Wal Mart for example), there are still many seeking work meaning that most employers are not feeling pressure to boost wages.
2) Consumers, the main driver of the U.S. economy, remain fairly cautious.
3) Overall factory orders have dropped.
4) The dollar has appreciated about 19 percent in the past year against other major currencies making the cost of U.S. goods higher overseas, slowing exports.
5) The International Monetary Fund has recommended the Federal Reserve hold off raising short-term interest rates until 2016 as a rate increase could disrupt the economy, urging the Fed to await signs of wage growth.
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