US jobs growth bolsters chance of Fed rate hike

Janet Yellen is chair of the US Federal Reserve
US JOB growth accelerated sharply in May and wages picked up, signs of momentum in the economy that bolster prospects for an interest rate hike in September.

Nonfarm payrolls increased 280,000 last month, the largest gain since December, the Labor Department said yesterday.

While the unemployment rate rose to 5.5 per cent from a near seven-year low of 5.4 per cent in April that was because more people, likely new college graduates, entered 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 an eight cent gain in average hourly earnings raises the chances of the Federal Reserve, chaired by Janet Yellen, tightening monetary policy this year. The dollar rallied against a basket of currencies, while prices for U.S. government debt dropped sharply. U.S. stock index futures fell.

May payroll gains lifted job growth above last year's average of 260,000 jobs per month.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, increased 0.1 percentage point to 62.9 per cent last month. A broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment was unchanged at 10.8 percent. The increase in average hourly earnings took the year-on-year gain to 2.3 percent, the largest rise since August 2013.

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