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U.S. jobs report seen underscoring economy's resilience

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[June 06, 2014]  By Lucia Mutikani
 
 WASHINGTON (Reuters) - U.S. employers likely maintained a solid pace of hiring in May, returning employment to its pre-recession level and offering confirmation the economy has snapped back from a winter slump.

The government's closely watched jobs report on Friday is expected to show that nonfarm payrolls increased by 218,000 positions, according to a Reuters poll of economists.

That would be a deceleration from April's outsized 288,000 job gain, when hiring was still bouncing back from a winter lull, but it would mark a fourth straight month with gains above 200,000 and an important milestone in the economy's recovery.

"I would take it as a very strong reading of economic expansion," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. "This is no longer a recovery in the economy, this is an outright expansion."

At the depth of the recession, the economy had lost 8.7 million jobs. If forecasts are on track, it finally recouped those jobs last month.

The pace of hiring would add to data ranging from automobile sales to services and factory sector activity that have suggested growth this quarter will top a 3 percent annual pace.

The economy contracted at a 1.0 percent rate in the first quarter, dragged down by unusually harsh winter weather and a slow pace of inventory building by businesses.

The Labor Department will release the jobs data at 8:30 a.m.

JOBLESS RATE TO TICK UP

While the unemployment rate is expected to rise to 6.4 percent from April's 5-1/2 year low of 6.3 percent, that would reflect Americans returning to the job hunt after dropping out of the labor market, a sign of growing confidence in their prospects.

Economists expect more previously discouraged workers to re-enter the labor force over the course of the year, which could slow the decline in the jobless rate.

About 800,000 people quit the labor force in April. That pushed the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, back to the 36-year low of 62.8 percent reached late last year.

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"The message is starting to get out that job opportunities may become more ample," said Anthony Karydakis, chief economic strategist at Miller Tabak in New York. "We may start having some more of the long-awaited phenomenon of people who have been previously discouraged re-entering the labor market."

That would be welcomed by the Federal Reserve, which has cited low labor force participation as one of the reasons for maintaining an extraordinarily easy monetary policy.

May employment gains were likely across all sectors.

Manufacturing employment is forecast expanding for the 10th straight month, and further increases are expected as auto sales outpace inventories. Construction payrolls likely advanced for a fifth month, economists said.

Sturdy job gains are also expected in retail, leisure and hospitality, professional and businesses services, as well as healthcare, while government payrolls probably logged a fourth straight monthly increase.

The length of the workweek likely held steady at 34.5 hours, according to the Reuters poll, while average hourly earnings likely rose 0.2 percent.

(Reporting by Lucia Mutikani)

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