US jobs data points to rate rise

US businesses are hiring again

Nearly a quarter of a million new jobs were created in the US last month, in a further sign that the world's biggest economy is recovering strongly.

Official figures showed that firms outside the agricultural sector hired an extra 248,000 people in May, beating the 216,000 expected by forecasters.

The overall unemployment rate held steady at 5.6%.

Analysts said the figures made an imminent rise in interest rates more likely, possibly as early as late June.

Fed in the frame

"Clearly these numbers are strong enough to erase any doubt that there will be a tightening at the end of June," said Chris Low at FTN Financial in New York.

Today's employment report demonstrates beyond a doubt, the broad-based strength and continuing momentum of the U.S. economy US Treasury Secretary Jon Snow

The US Federal Reserve has kept rates at a 46-year low of 1% since June last year in an effort to stimulate the flagging economy.

But earlier this year, it hinted that the next move in rates would be upwards, citing strong economic data.

The Fed's next rate-setting meeting takes place on 30 June.

The latest new jobs number, down slightly from 288,000 in April, confirms that US businesses have started hiring again.

For much of last year and the first quarter of 2004, new job creation remained stubbornly weak despite signs that the economic climate was improving

Election impact

The hiring spree - which partly offsets a swathe of job losses during the economic downturn of 2000/01 - looks set to boost President George W. Bush's re-election prospects.

The US' patchy economic performance since President Bush took office nearly four years ago had looked set to provide ammunition to his critics in the run-up to the November elections.

Treasury Secretary Jon Snow said the latest employment report demonstrated "beyond a doubt, the broad-based strength and continuing momentum of the U.S. economy."

Wall Street investors welcomed the report, marking the Dow Jones index of leading US shares 18 points higher at 10, 214 as soon as the exchange opened.