U.S. markets close in 5 hours 6 minutes

U.S. job growth seen slowing, unemployment to edge up

People attend a job fair in Detroit, Michigan in this March 1, 2014 file photo. REUTERS/Joshua Lott

By Lucia Mutikani

WASHINGTON (Reuters) - U.S. job growth likely slowed in May and the unemployment rate probably ticked up, but not by enough to upset the view that the economy is bouncing back strongly after a winter slump.

Employers probably added 218,000 jobs to their payrolls last month, according to a Reuters survey of economists. While that would be step down from April's robust 288,000 job gain, it would still be above the average for the preceding six months.

"It would be consistent with a noticeable acceleration in growth," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.

The economy contracted in the first quarter, slammed by unusually harsh winter weather and a slow pace of inventory-building by businesses. But data ranging from manufacturing to automobile sales suggest growth is rebounding, and economists look for it to top a 3 percent annual rate this quarter.

Though the jobless rate is forecast increasing a tenth of a percentage point to 6.4 percent from a 5-1/2 year low in April, it will likely be driven by people entering the labor force in search of work - a sign of confidence in the jobs market.

A sharp drop in the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, was the catalyst behind a surprisingly large decline in the jobless rate in April.

The Labor Department will release its monthly jobs report, which is closely watched by financial markets around the globe, on Friday at 8:30 a.m. (1230 GMT).


The Federal Reserve will likely view the report as confirmation of a steady labor market recovery. The U.S. central bank is reducing its monthly bond purchases, but it is not expected to raise interest rates until the second half of 2015.

"Fed tapering is firmly on autopilot. They are likely to gain comfort from the fact that the economy is creating jobs despite some volatility in the growth numbers," said Thomas Costerg, an economist at Standard Chartered Bank in New York.

Fed Chair Janet Yellen has pointed to the unusually large number of Americans who are either suffering a long spell of unemployment or who are working part-time because they are unable to find full-time work as justification for maintaining an extraordinarily easy monetary policy.

Employment gains are expected to have been broad-based in May, with the government adding jobs for a fourth straight month and construction payrolls up for a fifth month. Manufacturing payrolls likely expanded for the 10th consecutive month.

The length of the workweek probably held steady at 34.5 hours, while average hourly earnings likely rose 0.2 percent after being flat in April, according to the Reuters poll.

Wage growth has been tepid throughout the recovery.

"We need strong wage growth to really kick the economy into higher gear. Wages are very important for growth in the second half of this year," said Sweet.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)