The U.S. economy added 280,000 jobs in May – the strongest month of the year so far — as wages continued to rise and the labor participation rate ticked upward.
The latest report from the U.S. Labor Department exceeded most analysts’ expectations.
While the unemployment rate rose to 5.5 percent from a near seven-year low of 5.4 percent in April, analysts said that was because more people, such as new college graduates, attempted to enter the labor force, indicating confidence in the jobs market.
Payrolls for March and April were revised to show 32,000 more jobs created than previously reported. That, together with a gain in average hourly earnings raises, fueled speculation that the Federal Reserve Board may tighten monetary policy later this year. The Fed has kept overnight rates near zero since December 2008. The board will meet on June 16-17.
“We have now added 5.6 million jobs over the past two years, the best two-year job growth since 2000. The private sector has added 12.6 million jobs over 63 straight months of job growth, extending the longest streak on record,” said Jason Furman, chairman of President Barack Obama’s Council of Economic Advisers.
May was an especially strong month for leisure and hospitality (+57,000 jobs), government (+18,000), health care and social assistance (+58,000), private educational services (+17,000) and temporary help services (+20,000).
Sales of cars and light trucks at an annualized rate reached 17.71 million in May, the strongest level since 2005.
Meanwhile, pending home sales rose in April for the fourth straight month and reached their highest level in nine years, according to the National Association of Realtors. Led by the Northeast and Midwest, all four major regions saw increases in April.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 3.4 percent to 112.4 in April from a slight upward revision of 108.7 in March and is now 14.0 percent above April 2014 (98.6) — the largest annual increase since September 2012 (15.1 percent). The index has now increased year-over-year for eight consecutive months and is at its highest level since May 2006 (112.5).
Lawrence Yun, NAR chief economist, said the steady gains in contract activity each month this year highlight the fact that buyer demand is strong.
“Realtors are saying foot traffic1 remains elevated this spring despite limited — and in some cases severe — inventory shortages in many metro areas,” Yun said. “Homeowners looking to sell this spring appear to be in the driver’s seat, as there are more buyers competing for a limited number of homes available for sale…As a result, home prices are up and accelerating in many markets.”