Nation adds 1.2 million jobs

Saturday, June 5, 2004

WASHINGTON -- U.S. employers hired almost a quarter-million new workers in May, swelling payrolls by nearly 1.2 million for the year so far in a jobs market steadily gaining steam ahead of November's presidential election.

The nation's unemployment rate held steady at 5.6 percent as more jobless workers renewed their searches and re-entered the labor pool, the Labor Department said Friday.

May's payroll increase of 248,000 was on top of revised employment figures for March and April showing 74,000 more jobs were added than previously reported. Three-quarters of the total jobs created this year were added in the past three months.

"These blowout numbers so far this year are the convincing evidence that the economic recovery is here to stay," said Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis. "The last piece of the puzzle, jobs, has fallen into place."

The job-creation numbers exceeded analysts' expectations and cemented predictions of the first interest rate increase in four years when the Federal Reserve next meets June 29. A quarter-point increase in the Fed's key federal funds rate is close to certain, followed by another hike in August.

On Wall Street, the report sent stocks moderately higher. The Dow Jones industrial average gained 47 points to close at 10,243, while the Nasdaq composite index rose 18 to 1,979.

Hiring last month was widespread, with the biggest gains in construction, health care, professional and business services and hotels and restaurants.

"What is really key is that every major sector had improvements," said John Silvia, chief economist for Wachovia Securities. "That suggests these gains are sustainable."

The struggling manufacturing sector also is reawakening, adding 32,000 new jobs last month. Based on revised figures, it was the fourth straight month of payroll increases after almost three years of continuous losses.

Friday's report was good news for President Bush, who has been counting on continued employment growth to boost his re-election prospects. His campaign rushed out a new television ad praising the new job-creation numbers.

Bush, in Rome, said: "Today's job report shows that the American economy is strong, and it's getting stronger -- 248,000 jobs for last month is good for the American workers. It shows that our economy is vital and growing."

His Democratic presidential opponent, John Kerry, said it was terrific that the economy had created more than 240,000 new jobs, but there remained "too many people struggling while at the top-end people get ahead."

"I think it ought to be the reverse," he said at a rally at the University of Minnesota in Minneapolis. "I think we need to make it possible for every American to get ahead, for the economy of this country to work for all people."

Despite the nine-month hiring spree, more than 1.2 million jobs have been lost since Bush took office in January 2001. The losses, however, are shrinking.

"I'm pleased to see strong job growth, and that's what I am concerned about," Labor Secretary Elaine Chao said in an interview. "Every month of strong job growth is good news to me and it's good news for America."

The Bush administration was criticized widely for an overly optimistic forecast that 2.6 million jobs would be created this year. Economists now say the chugging economy could approach that mark.

David Wyss, chief economist at Standard & Poor's in New York, said he expects continued payroll increases of about 200,000 for several months.

Last month, construction employment rose by 32,000 in May, with 91,000 new jobs added since January. In the services sector, professional and business services added 64,000 jobs, fueled by hiring increases in temporary employment firms. Hiring at such firms has grown by 14 percent since April 2003.

Hotels and restaurants added 33,000 jobs over the month, and financial services boosted payrolls by 15,000.

Some industries lost jobs, including telecommunications, which shed 5,000 positions last month. Also, there were fewer government jobs last month as employment in that sector fell by 27,000.

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