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Steady as she goes: Job creation keeps up pace

Nonfarm payrolls grew at a pace in line with recent trends, rising 217,000 in May as the unemployment rate held steady at 6.3 percent, according to numbers released Friday by the Bureau of Labor Statistics.

Most of the job gains came on lower-paying industries as wages rose modestly, increasing 5 cents an hour to maintain the 2.1 percent growth over the past 12 months. Average hours worked came in flat at 34.5.

A broader measure of joblessness that includes those working part time for economic reasons and those who have quit looking remained elevated at 12.2 percent, though that was a low for the year and the best "U6" measure since October 2008.

Economists surveyed by Reuters expected 218,000 U.S. jobs were created last month, down from April's downwardly revised 282,000. The unemployment rate had been expected at 6.4 percent.

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A worker makes sure that no chips stick to the kettle during cooking at Route 11 Potato Chips, March 6, 2014, in Mount Jackson, VA.
Jahi Chikwendiu | The Washington Post | Getty Images
A worker makes sure that no chips stick to the kettle during cooking at Route 11 Potato Chips, March 6, 2014, in Mount Jackson, VA.

Over the past 12 months, the U.S. economy has averaged 197,000 new jobs per month.

"There does seem to be upshift in the nonfarm payrolls higher to a plus-200,000 number, which is good," Mike Materasso, co-chair of the Franklin Templeton Fixed Income Policy Committee, said in an interview. "You have an economy that is doing better and probably growing above trend."

Market reaction to the report was muted, with stock market indexes edging higher and interest rates nudging lower.

Taken together, the numbers seem unlikely to change Federal Reserve policy as the U.S. central bank unwinds its monthly bond-buying program while keeping short-term interest rates near zero.

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"This is an almost uneventful report. It's very much in line with expectations," said Wouter Sturkenboom, investment strategist at Russell Investments. "The Fed probably will be fairly pleased with the report. It provides confirmation that the jobs recovery is ongoing, but it also gives them cover to say there's plenty of slack in the labor market."

Materasso said the report was "definitely not a needle-mover" in terms of Fed policy, though he does expect the Open Market Committee's tone on the economy to improve over the course of the year and ultimately push bond yields higher.

Indeed, the internals of the report showed that while actual job growth continues in line with trends, there remains weakness in terms of job quality and other metrics.

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Professional and business services along with health led the way in May, with both sectors creating 55,000 new jobs. Hospitality—primarily bars and restaurants—grew by 32,000.

Manufacturing and construction, by contrast, were about flat. Labor force participation, a key metric whose sharp decline has played a major role in the falling unemployment rate, remained flat at 62.8 percent, matching the worst level since March 1978.

Breaking down the numbers, 145,000 more people were employed, while 46,000 more were unemployed. Long-term unemployment remains a problem, though the average duration of joblessness fell to 34.5 weeks, the lowest level November 2010.

The number of those working part-time for economic reasons dropped 196,000, while those working part time by choice grew 154,000.

Click here for the market reaction.

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