WASHINGTON -- The U.S. economy added 175,000 jobs in May - a steady pace that shows strength in the face of tax increases and government spending cuts if not enough to reduce still-high unemployment.
The unemployment rate rose to 7.6 percent from 7.5 percent in April, the Labor Department said Friday. The rate rose because more people began looking for work, a healthy sign, but only about three-quarters found jobs.
Analysts said the less-than-robust job growth would likely lead the Federal Reserve to maintain the pace of its monthly bond purchases for a few more months. The bond purchases have been intended to ease long-term borrowing costs and lift stock prices.
Investors appeared pleased by the evidence that job growth remains steady. The Dow Jones industrial average was up about 138 points in midafternoon trading.
Friday's job figures provided further evidence of the U.S. economy's resilience. The housing market is strengthening, auto sales are up, and consumer confidence has reached a five-year peak. Stock prices are near record highs, and the budget deficit has shrunk.
The U.S. economy's relative strength contrasts with Europe, which is gripped by recession, and Asia, where once-explosive economies are now struggling.
Many analysts expect the U.S. economy to strengthen later this year.
"Today's report has to be encouraging for growth in the second half of the year," said Dan Greenhaus, an analyst at BTIG LLC.
Employers have added an average of 155,000 jobs the past three months. But the May gain almost exactly matched the average increase of the previous 12 months: 172,000.
Americans appear to be more optimistic about their job prospects: 420,000 people started looking for work in May. As a result, the percentage of Americans 16 and older either working or looking for work rose to 63.4 percent from a 34-year low of 63.3 percent in April.
This is called the labor force participation rate. Higher participation can boost the unemployment rate. That's because once people without a job start looking for one, they're counted as unemployed.
Labor force participation has been falling since peaking at 67.3 percent in 2000. That's partly the result of baby boomers retiring and dropping out of the work force.
Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities, said he thinks an improving job market will encourage more Americans to look for jobs. He predicts the participation rate will level off at around 63.5 percent.
The unemployment rate is derived from a survey of households. This survey found more people started looking for work in May. Since some didn't find jobs right away, the number of unemployed rose 101,000 to 11.7 million.
The job gain for the month is calculated from a separate survey of employers.
Some signs in the report suggested the government spending cuts, which began taking effect in March, and weak growth in much of the rest of the world are weighing on the U.S. job market. Weakness overseas has slowed demand for U.S. exports.
Manufacturers cut 8,000 jobs, and the federal government shed 14,000. Both were the third consecutive month of cuts for those industries.
The number of temporary jobs rose about 26,000, the second straight month of strong gains. That suggests that employers are responding to more demand but aren't confident enough to hire permanent workers.
Industries that rely directly on consumer spending hired at a healthy pace - a sign of confidence that consumers will keep spending. Retailers added 28,000 jobs. Restaurants and hotels added 33,000.