US hiring rises along with jobless rate

US employers added 175,000 jobs in May, in a sign the economy is growing modestly, but the jobless rate rose slightly to 7.6 percent in May.

The Labour Department said on Friday that the unemployment rate rose from 7.5 percent in April.

The less-than-robust job growth might lead the Federal Reserve to maintain the pace of its monthly bond purchases. The Fed has said it will keep buying bonds at the same rate until the job market improves substantially. The purchases have helped drive down interest rates and boost stock prices.

The increase occurred because more people began looking for work. About three-quarters found jobs, while the rest added to the ranks of the unemployed.

The government said the economy added 12,000 fewer jobs in April and March.

Employers have added an average of 155,000 jobs in past three months, below the average of 237,000 created from November through February.

Ira Jersey, an interest rate strategist at Credit Suisse in New York, said that the economic data was not bad overall.

“The confusing part for the market to digest initially was the unemployment rate going up a little bit,” Jersey said.

Work force expanding

“But it went up for the right reason, the labor force expanded by the most in a long time.”

Job growth has been steady this year, despite higher taxes and federal spending cuts.

But there were signs in the report that the spending cuts and weaker global growth were weighing on the job market.

Manufacturers cut 8,000 jobs, and the federal government shed 14,000.

Both were the third straight month of cuts for those industries.

The economy grew at a solid annual rate of 2.4 percent in the first three months of the year.

Consumer spending up

Consumer spending rose at the fastest pace in more than two years. But economists worry that steep government spending cuts and higher Social Security pension taxes might be slowing growth in the April-June quarter to an annual rate of 2 percent or less.

Cuts in defence spending might have slowed factory output in some areas, according to a Federal Reserve report released this week.

Factory activity shrank in May for the first time since November, and manufacturers barely added jobs, according to a survey by the Institute for Supply Management.

A separate ISM survey found that service companies grew at a faster pace last month but added few jobs.

Service firms have been the main source of job growth in recent months, as companies in that sector reported an increase in new orders, the ISM found.

That suggests that businesses could expand further in coming months.

Steady gains in home sales and construction were providing support for the economy even as manufacturing weakened.