WASHINGTON: The US economy added 175,000 jobs in May, a gain that shows employers are hiring at a still-modest but steady pace despite government spending cuts and higher taxes.

Analysts said the less-than-robust job growth would likely lead the Federal Reserve to maintain the pace of its monthly bond purchases for at least a few more months. The Fed has said it will keep buying bonds at the same rate until the job market improves substantially. The bond purchases have helped drive down interest rates and boost stock prices.

The unemployment rate rose to 7.6 percent from 7.5 percent in April, the Labor Department said yesterday. The rate rose because more people began looking for work, a healthy sign. About three-quarters found jobs.

The government revised the job figures for the previous two months. April's gain was lowered to 149,000 from 165,000. March's was increased slightly to 142,000 from 138,000. The net loss was 12,000 jobs. "Today's report has to be encouraging for growth in the second half of the year," said Dan Greenhaus, an analyst at BTIG LLC. It also eased worries that had arisen after economic reports earlier this week had suggested that the economy might be weakening.

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.

Stock markets have gyrated in the past two weeks on speculation that the Fed would soon start to taper its $ 85 billion-a-month in bond buying — a step that could raise rates and cause stock prices to fall.

Some signs in the report suggested that the spending cuts and weaker global growth are weighing on the job market. Manufacturers cut 8,000 jobs, and the federal government shed 14,000. Both were the third straight 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. Many temporary employees work in manufacturing, which cut permanent jobs.

But 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.

Average hourly wages ticked up just a penny in May, to $ 23.89. That was because much of the job growth was in lower-paying industries.

But mild inflation is boosting American's purchasing power. Over the past 12 months, hourly wages have risen 2 percent. Inflation has increased just 1.1 percent in that time.

The economy grew at a solid annual rate of 2.4 percent in the first three months of the year. Consumer spending rose at the fastest pace in more than two years. But economists worry that the steep government spending cuts and higher Social Security taxes might be slowing growth in the April-June quarter to an annual rate of 2 percent or less.

Consumers appeared earlier this year to shrug off the tax increase. But in April, their income failed to grow, and they cut back on spending for the first time in nearly a year. A Social Security tax increase is costing a typical household that earns $ 50,000 about $ 1,000 this year. For a household with two high-earners, it's costing up to $ 4,500.

Meanwhile, Canada's economy added the most jobs in more than a decade in May led by full-time employment ranging from construction to retailing, suggesting resilience in domestic demand while foreign trade remains weak.

Employment rose by 95,000 in May, the most since August 2002, and the jobless rate fell to 7.1 percent from 7.2 percent even as more Canadians joined the work force, Statistics Canada said yesterday in Ottawa.

Finance Minister Jim Flaherty said the report is a "good sign" that government policies are working in an e-mailed statement. The data come after Statistics Canada said May 31 that economic growth accelerated to a 2.5 percent annualized pace in the first quarter from 0.9 percent in the last three months of last year.

Construction accounted for almost half the gains in May, rising by 42,700. The retail and wholesale category rose 27,200, followed by the "other services" category at 21,500 and business and building services at 21,300.

Full-time employment rose by 76,700 in May while part-time work advanced by 18,200, Statistics Canada said. Private companies added 94,600 workers and public-sector employment rose by 6,600. More than 80,000 people joined the labor force in May, pushing the participation rate to 66.7 percent from 66.5 percent.