The US economy strengthened in May, as a robust job growth encouraged consumers to give a boost to their spending regardless of the housing slump and high energy prices. According to a new data released recently, employers added nearly twice the numbers of jobs they had in April, and at the same time manufacturing sector grew at its fastest rate in more than a year. The Labor Department in its monthly survey of national employment reported that 157,000 jobs were created last month, compared with 80,000 in April. On the other hand, the unemployment rate held steady at 4.5 percent. However, the percentage of the employed was unmoved at 63 percent.
The number of new jobs created in May practically exceeded Wall Street economists’ estimate for 130,000 jobs and adequately underscoring other recent evidence that the pace of economic activity was bouncing back from a soft patch in the first three months of the year. However, the resent data also raises uncertainties about the possibility that tight labor markets will generate wage and price pressures. In fact, the most important reason the employment conditions has been holding healthy through the economy’s nearly yearlong period of sluggishness is due to the fact that most of the weakness has been concentrated in the housing and automotive industries. These troubled spots have not spread widely through the rest of the job market.
On the question of growth rate opinions are divided as many analysts believe that the economy in the present quarter is growing at a speed of around 2.3 percent. Whereas a faction of optimistic analysts insists that economic growth will be better and might surpass 3 percent growth rate. In both scenarios, it would represent a considerable pickup from the weak 0.6 percent growth rate reported in the January-to-March quarter, the worst in more than four years. In addition, Federal Reserve Chairman Ben Bernanke has also assured that economic growth will perk up. At the same time, in another positive indication for the anticipated rebound, factories gained ground last month.
Another report, released by the Commerce Department, has showed consumer spending shot up 0.5 percent in April, marking the biggest increase in two months. But, consumers income slipped by 0.1 percent in April, a month when job and wage growth had slowed. Economists at that time seemed unperturbed with the situation and had said that they were not worried by the decline and believed it was exaggerated by adjustments related to incentive and bonus payments.
Meanwhile, inflation dropped closer to a level that the Federal Reserve considers as acceptable. A measure of prices in the Commerce Department report that the Fed carefully observes since it excludes impulsive food and energy prices rose 2 percent from April 2006. However, inflation still remains a major concern for the economy. There are substantial uncertainties about the economy’s health. Consumer spending was evidently robust in the beginning of the year, but the trend could be damaged if higher gas prices and the slumping housing market test the pockets of average US households. That could put the labor market in trouble.
