U.S. employers added 217,000 jobs in May, a substantial gain for a fourth straight month, fueling hopes that the economy will accelerate after a grim start to the year.
Monthly job growth has averaged 234,000 for the past three months, up sharply from 150,000 in the previous three. The unemployment rate, which is derived from a separate survey, remained 6.3 percent in May. That's the lowest rate in more than five years.
Friday's report from the Labor Department signaled that the U.S. economy is steadily strengthening and outpacing struggling countries in Europe and Asia. U.S. consumers are showing more confidence. Auto sales have surged. Manufacturers are expanding steadily. Service companies are growing more quickly.
“I don't think we have a boom, but we have a good economy growing at about 3 percent,” said John Silvia, chief economist at Wells Fargo. “We're pulling away from the rest of the world.”
Investors seemed pleased. The Dow Jones industrial average rose 67 points in mid-day trading.
The job market has now reached a significant milestone: Nearly five years after the Great Recession ended, the economy has finally regained all the jobs lost in the downturn.
More job growth is needed, though, because the U.S. population has grown nearly 7 percent since then. Economists at the liberal Economic Policy Institute estimate that 7 million more jobs would have been needed to keep up with population growth.
In addition, pay growth remains subpar. Average wages have grown roughly 2 percent a year since the recession ended, well below the long-run average annual growth rate of about 3.5 percent.
Unemployment has fallen from a 10 percent peak in 2009 partly for an unfortunate reason: Fewer people are working or looking for work. The percentage of adults who either have a job or are looking for one remained at a 35-year low in May.
Still, the United States is faring far better than most other major industrial nations. Overall unemployment for the 18 countries that use the euro was 11.7 percent in April, though some European nations, such as Germany and Denmark, have much lower rates.
On Thursday, Europe's central bank cut interest rates and took other extraordinary steps to try to boost ultra-low inflation, encourage more lending and jump-start growth.
Japan is struggling to emerge from more than a decade of sluggish growth and deflation. And China has been undergoing a prolonged slowdown from explosive expansion and is in danger of slowing too sharply.
“The U.S. was incredibly aggressive” after the financial crisis and Great Recession, says Daniel Drezner, a professor of international politics at Tufts University. “Compared to Europe in particular, we did much more.”
The U.S. government approved stimulus spending and tax cuts, Drezner noted, while many European nations cut spending. And the Federal Reserve slashed rates further than the European Central Bank did and launched bond purchases to lower long-term loan rates.
Japan's and Europe's central banks are only now considering the type of unconventional measures that the Fed launched in 2008, Drezner said.
The solid U.S. hiring gain in May might be expected to lower the unemployment rate. But the two figures come from separate surveys. The job gain is derived from a survey of businesses, the unemployment rate from a survey of households. The two sometimes diverge but usually paint a similar picture over time. For May, the survey of businesses found a bigger job gain than the survey of households did.
Average hourly pay rose 5 cents in May to $24.38. That's up 2.1 percent from 12 months ago and barely ahead of inflation, which was 2 percent.
Weak wage growth has limited Americans' ability to spend. That, in turn, has slowed growth, because consumer spending drives about 70 percent of economic activity.
“The sluggishness in wages is the weak link that is preventing the U.S. economy from fully expanding its wings,” said Gregory Daco, U.S. economist at Oxford Economics.
One reason pay has lagged: The new jobs added since the recession have been more likely to be part time and in lower-paying industries. That pattern was evident in May: Hotels, restaurants and entertainment companies added 39,000 jobs. Retailers gained 12,500, temporary services 14,300.
By contrast, construction firms added just 6,000, manufacturers 10,000. Those industries tend to be higher-paying.
There are still 2.9 million fewer people working in full-time jobs than when the recession began. And nearly 2.5 million more are working in part-time positions.
Still, the United States has now added more than 200,000 jobs a month for four straight months — the first time that's happened since 1999.
Many economists say unemployment hasn't fallen far enough yet for wages to rise significantly across the economy. Yet there are some signs that wage pressures might soon emerge. One measure that Fed Chair Janet Yellen has cited as reflective of the job market's health is the number of people out of work for more than six months. This figure reached record highs after the recession ended and has declined slowly.
The number of long-term unemployed fell 78,000 to 3.37 million last month, down from 4.4 million a year ago.
Some companies are starting to raise pay to attract workers. Applied Medical Technology, based in Cleveland, has boosted the starting wage for its assembly and production jobs to $10 an hour from $8.25.
Jeff Elliott, the chief financial officer, said the company wants to add 30 people to its staff of 180. But its job advertisements are “getting less response than we used to get.”
The U.S. economy actually shrank in the first three months of this year as a blast of cold weather shut down factories and kept consumers away from shopping malls and car dealerships. The economy contracted at a 1 percent annual rate, its first decline in three years.
Still, most economists expect annualized growth to reach 3 percent to 3.5 percent in the current quarter and to top 3 percent for the rest of the year.