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Manufacturing lags as US jobs total rises by 300,000

THE US employment market displayed another burst of strength in May, adding nearly 300,000 jobs. But behind the figures, there were signs of weakness in industry due to the impact of the Asian economic crisis.

The data confirmed that the US Federal Reserve faces a difficult decision over whether to increase interest rates. But Wall Street took a benign view, preferring to focus on the positive impact on second-quarter profits rather than the inflationary risks.

The Dow Jones Industrial Average was up more than 100 points by early afternoon, at 8974.44. That reaction helped the FTSE 100 index climb nearly 87 points to 5,947.3, more than recovering from the previous day's setback.

The US unemployment rate was stable at 4.3 per cent in May, remaining at the 28-year low recorded in April. But the economy added 296,000 jobs, far more than expected.

The job gains came in the domestically oriented service sector, with an increase of 322,000. New jobs were added in temporary help firms, retailing, data processing, computers and finance.

Manufacturing employment declined slightly by 26,000, with a loss of jobs in the clothing industry, electronic equipment, industrial machinery and car manufacturing.

"It is reasonable to suspect that at least some of the recent declines in manufacturing employment and hours are related to Asia's economic problems," said Katharine Abraham of the Bureau of Labour Statistics.

Average hourly earnings rose by four cents in May, and have risen 4.4 per cent over the past year - faster than consumer price inflation.