US adds solid 280,000 jobs; unemployment rate edges up to 5.5 pct. as more people seek work

WASHINGTON — Employers last month delivered a vote of confidence in the U.S. economy.

They added 280,000 jobs — a surprisingly robust total at a time when consumers are hesitant to spend and the economy appears less than fully healthy. Some key industries, from energy to manufacturing, have been struggling. And economic troubles overseas have put investors on edge.

Yet Friday's report from the Labor Department showed that employers seem confident that the economy is regaining its footing after shrinking at the start of the year and that their customer demand will accelerate.

"It's kind of a strange situation because consumers are getting jobs, and their incomes are improving," said John Silvia, chief economist at the bank Wells Fargo.

Six years after the worst downturn in more than seven decades officially ended, Silvia said, "We've moved beyond the Great Recession."

Across the economy, employers are betting that steady hiring has begun to drive economic momentum. Home and auto sales are up. Restaurants, sports stadiums, theaters and hotels added 57,000 workers last month in anticipation of summer vacations.

Friday's report led many economists to predict that the Federal Reserve will raise interest rates as early as September because the economy might no longer need the stimulus of near-zero rates.

Here are five reasons U.S. employers are stepping up hiring despite tepid economic growth:

— ECONOMIC NUMBERS BETTER THAN THEY APPEAR

The economy shrank in the January-March quarter at an annual rate of 0.7 percent, its worst showing in a year. Growth is recovering in the current quarter, though it's expected to reach no more than a modest 2 percent to 2.5 percent annual pace.

Economists say much of the winter slowdown reflected temporary factors that are fading: Harsh winter weather kept many shoppers indoors. A steep drop in oil prices hammered the energy industry, which sharply reduced spending on drilling rigs, steel pipe and other goods. A labor dispute at West Coast ports disrupted exports.

"There's a lot of reasons to believe that the first quarter was transitory," said Michael Feroli, chief U.S. economist at JPMorgan Chase. "Presumably, employers saw the same thing — that if you had a bad winter, you wouldn't change expansion plans."

— HOT TIME FOR COLLEGE GRADUATES

The jobs recovery has been defined in part by a disproportionate number of low-wage positions: Burger flippers, store cashiers and home health aides. It's hard for an economy to boom when a growing share of workers are stuck in jobs that pay far less than the average hourly wage of $24.96.

But employers are showing a renewed appetite for new college graduates. In May, 780,000 began looking for work, and 760,000 found jobs. College graduates tend to have higher lifetime earnings and fewer bouts of unemployment, reflecting the prosperity that generally comes from higher education.

Deonta Brooks graduated from Auburn University in May and received two job offers. He chose to become a government food inspector in Alabama, figuring his salary would go further there than in Chicago, where the other position is based.

"There are a ton of jobs," he said. "I applied for 20-something jobs, so I knew eventually that I was going to get something."

Major U.S. corporations are burdened by the strong dollar, which has made their goods more expensive overseas and cut into export sales and foreign profits. But smaller businesses, which employ a majority of the U.S. workforce, are largely immune to currency swings. And they appear to have stepped up hiring in May more than larger companies did.

Payroll processor ADP says companies with fewer than 50 employees added 122,000 jobs in May — 10 times the number added by companies with more than 500 workers.

The Baltimore-based tutoring company Sylvan Learning plans to open up to 20 centers this year, creating 30 to 40 full-time and potentially 400 part-time jobs. Greater demand for their programs in science, math and robotics indicates that more parents are investing in their children's futures, said Sylvan Learning chief financial officer John McAuliffe.

— FULL-TIME JOBS ARE PICKING UP

One ongoing concern throughout the recovery has been the prevalence of part-time jobs. But full-time employment has been picking up in recent months, while part-time jobs have leveled off. The number of Americans with full-time jobs surged 630,000 in May and has jumped 2.6 million in the past year.

— PAY RAISES PICKING UP

Pay increases have been a missing piece in this recovery. Workers have been getting by on raises barely above inflation. But pay rose at a faster clip in May — 2.3 percent over the past year. This suggests that the 5.5 percent unemployment rate may be leading to the kind of tight job market that generally compels employers to raise wages to attract workers.

"It's still not great, still not a 3 percent growth rate, but it's better than the past two months," said Gregory Daco, lead U.S. economist at Oxford Economics, who sees wage growth returning.