Payroll surge: Employers added 280,000 jobs in May

The labor market's spring rebound strengthened in May as U.S. employers added 280,000 jobs, soundly topping economists' estimates.

The unemployment rate rose to 5.5% from 5.4%, the Labor Department said Friday. That's largely because an improving market drew an additional 400,000 Americans into the labor force, which includes those working and looking for jobs.

Economists surveyed by Bloomberg expected employment gains of 220,000, according to their median forecast.

Businesses added 262,000 jobs, led by solid gains in professional and business services, leisure and hospitality, and health care. Federal, state and local governments added 18,000.

But oil companies continued to lay off workers in response to low crude prices. The mining and logging industry lost 18,000 jobs.

Payroll gains for March and April were revised up by a total 32,000. March's count, which was an anemic 85,000, was revised to 119,000 . And the April estimate is now, down slightly from 223,000.

Also encouraging is that wage growth, which has been sluggish throughout the recovery, picked up a bit. Average hourly earnings increased 8 cents to $24.96. Over the past year, pay is up 2.3%, compared to a 2.2% annual rise in April and about 2% since the recession.

"The economy is strong enough for businesses to be adding lots of workers and they're now paying up for them," says Joel Naroff of Naroff Economic Advisors. "Wages are not where they should be but they're clearly accelerating."

Professional and business services led the employment gains with 63,000. Leisure and hospitality added 57,000 jobs; health care, 47,000; retailers, 31,000; and construction, 17,000.

Manufacturers, which have been hurt by a strong dollar that has made US exports more expensive for foreign buyers, added a modest 7,000 jobs,but that's up from 1,000 the previous month.

The economy has been sending mixed signals recently as it transitions from a harsh winter that crimped activity to the stronger growth expected in the second half of the year. Initial jobless claims -- a barometer of layoffs -- trended lower last month. And payroll processor ADP reported that businesses added a solid 200,000 jobs.

But measures of May employment in surveys of the manufacturing and service sectors slipped. And Goldman Sachs said warmer weather probably boosted payroll gains in April after hiring slumped during March's cold spell, "potentially borrowing against some job growth in May."

The economy appears to have recovered from the extreme weather and a dockworkers' slowdown on the West Coast. But the rising dollar is still curtailing exports and corporate earnings, and low oil prices continue to trigger energy industry layoffs.

Friday's payroll report "adds to the evidence that the US economy is regaining momentum after another winter slowdown," Paul Ashworth, chief US economist at Capital Economics, wrote in a note to clients.

After the economy contracted in the first quarter amid the harsh weather, Fridays job news probably isn't enough to persuade the Federal Reserve to raise its benchmark interest rate at meetings in June or July, Ashworth says. But it makes a September hike "probable," he says. The Fed's key rate has been near zero since the 2008 financial crisis.

Before Friday's report, employment gains had slowed this year to a still-solid monthly pace of just below 200,000 from a 15-year high of 260,000 in 2014.