Washington, June 2 (Bloomberg) -- U.S. companies added workers for a straight second month and manufacturing expanded in May, evidence of the economy's rebound from recession, reports this week will probably show. An expected rise in the jobless rate is likely to temper expectations for the pace of recovery. Payrolls rose by about 75,000 last month after an increase of 43,000 in April, according to the median forecast in a Bloomberg News survey of 49 economists. The Labor Department's report on Friday may show last month's job increase to be the biggest since February 2001, just before the recession began. Manufacturing grew for a fourth straight month, the Institute for Supply Management is expected to report on Monday. Companies such as BorgWarner Inc. are starting to hire workers to keep up with increasing demand. ``The economic recovery does appear to be developing staying power and even gaining momentum,'' Lynn Reaser, chief economist at Banc of America Capital Management in St. Louis, said. At the same time, the jobless rate probably rose last month to 6.1 percent, the highest in almost eight years, from 6 percent in April. Unemployment often increases at the start of a recovery because people start looking for jobs and companies remain cautious about hiring. The yield on the Treasury's benchmark 10-year note has fallen for the past two weeks and may drop again this week as rising unemployment suggests consumer spending may falter. Two weeks ago, the 4 7/8 percent note that matures in February 2012 was 5.25 percent. Friday, it was almost a quarter percentage point lower at 5.05 percent.

Fed Rate Expectations
Federal Reserve policy makers, who reduced the overnight bank lending rate 11 times last year to a 40-year low of 1.75 percent, aren't expected to start raising rates before August, judging from trading in federal funds futures contracts. The implied yield on the September contract, tied to the Fed's August meeting, was 1.91 percent, down from 2.01 percent two weeks ago. That suggests investors are beginning to expect even an August rate increase isn't certain. The economy is likely to expand at a 3.1 percent annual pace this quarter after growing at a 5.6 percent rate from January through March, according to the latest Blue Chip Economic Indicators forecast. For the year, the economy will probably expand 2.8 percent, compared with 1.2 percent in 2001. The supply managers' factory index probably rose to 54.5 in May from 53.9 in April.

BorgWarner Orders
``We have a lot of orders in the second half of the year,'' said John F. Fiedler, chief executive officer of BorgWarner, the world's biggest maker of automatic-transmission parts for cars and trucks. Sales worldwide ``are running so strong that we've had to allow managers to go out and start adding people'' for the first time since September 2000.
Economists expect that factories cut 14,000 jobs in May, the smallest decline since manufacturers started shedding workers 22 months ago.
Services, the biggest part of the economy, also expanded in May for a fourth consecutive month, a separate report Wednesday from the Institute for Supply Mnagement is likely to show. The group's index of retail, financial services, construction and other non-manufacturing companies probably rose to 56 from 55.3. Readings higher than 50 mean expansion.

Claims, Inventories
Other reports this week:
-- On Monday, the Commerce Department will probably report a 0.1 percent decline in April construction spending after a 0.9 percent drop in March and a 0.7 percent gain in February.
-- On Thursday, the Labor Department's report on first-time claims for state unemployment benefits will probably show a decline to 405,000 for the week that ended Saturday. The prior week, 410,000 workers filed jobless claims.
-- The Commerce Department will probably report on Friday that inventories at wholesalers rose 0.1 percent in April, the first increase in 16 months, as distributors replenished depleted stockpiles.
-- Also on Friday, the Federal Reserve is expected to report that consumer borrowing rose by $6 billion in April after a $4.6 billion increase the previous month.