US employers added a larger-than-expected 248,000 jobs in May, according to a government report that confirmed a strengthening economy is likely to usher in higher interest rates.
The May tally by the Labour Department exceeded Wall Street expectations for 216,000 new jobs and followed an upwardly revised total of 346,000 jobs in April and 353,000 in March. The 947,000 jobs created in the March-May period make it the strongest three-month stretch in four years.
The growing evidence of accelerating economic activity cemented expectations that Federal Reserve policy-makers will ratchet up US interest rates from current 1958 lows when they meet June 29-30 and may prove a boon to election-bound President George W. Bush.
A Reuters poll of 22 primary dealers - big Wall Street firms that deal directly with the Federal Reserve in securities - found them unanimously anticipating the Fed will raise interest rates a quarter percentage point later this month.
The US central bank aims to sustain growth by keeping inflation pressures in check. Fed Governor Donald Kohn told the National Economists Club the federal funds rate would have to rise now that weak demand and falling inflation were gone.
"Circumstances have changed and policy will respond," Mr Kohn said.
Private-sector analysts agreed the ground has shifted. "Clearly, the jobless recovery is behind us," said economist Gary Thayer of A.G. Edwards and Sons Inc. in St. Louis, Mo. "The economy probably does not need as much stimulus... so the Fed is likely to start raising rates soon."
The unemployment rate remained at 5.6 per cent in May, unchanged from April.
President Mr Bush, on a visit to Rome, took time out to hail the job-growth numbers, which he said "show that the American economy is strong and it's getting stronger." But prospective Democratic presidential nominee, Senator John Kerry, issued a statement saying America "is still in the worst job recovery since the Great Depression" and ordinary Americans were under pressure from rising costs for gasoline, health care and college tuition.
Still, virtually every major private sector of the economy added jobs in May, from retailing to construction industries. There was a dip in government employment.
Particularly notable were 32,000 new hires in manufacturing - a fourth straight monthly increase and the biggest since August 1998 when 143,000 manufacturing jobs were created, the department said.