Weather dampens U.S. job growth; unemployment rate drops to 4.5 percent
Nonfarm payrolls increased by 98,000 jobs last month, the fewest since last May, the Labor Department said on Friday.
Job gains, which had exceeded 200,000 in January and February, were also held back by a slowdown in hiring at construction sites, factories and leisure and hospitality businesses, which had been boosted by unseasonably warm temperatures earlier in the year.
In March, temperatures dropped and a storm lashed the Northeast and Midwest. Economists said bad weather accounted for the stepdown in hiring. The two-tenths of a percentage point drop in the unemployment rate from 4.7 percent in February took it to its lowest level since May 2007.
“The disappointing gain in nonfarm payrolls in March is a bit of a head fake that doesn’t reflect the underlying strength and momentum in the labor market,” said Scott Anderson, chief economist at Bank of the West in San Francisco.
While the bigger establishment survey showed fewer jobs created last month, the smaller and more volatile survey of households showed employment increased 472,000.
The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population and some Federal Reserve officials view the labor market as being at full employment. Economists had forecast payrolls increasing 180,000 last month and the unemployment rate unchanged at 4.7 percent.
The dollar rose a three-week high against a basket of currencies while prices for U.S. Treasuries fell. Stocks on Wall Street rose.
LABOR MARKET SLACK SHRINKING
Job growth averaged 178,000 per month in the first quarter, underscoring the labor market’s strength, despite last month’s stumble.
The solid employment gains suggest that an apparent slowdown in gross domestic product growth to around a 1.0 percent annualized pace in the first quarter is probably temporary. The economy grew at a 2.1 percent rate in the fourth quarter.
Average hourly earnings increased 5 cents or 0.2 percent in March after rising 0.3 percent in February. That lowered the year-on-year gain in wages to 2.7 percent.
But with inflation rising and the unemployment rate below the most recent Fed median forecast for full employment, economists expect another interest rate increase in June.
The U.S. central bank lifted its overnight interest rate by a quarter of a percentage point in March and has forecast two more increases this year. Minutes from the Fed’s mid-March meeting showed most policymakers expected to start reducing the Fed’s $4.5 trillion bond portfolio later this year.
New York Fed President William Dudley said on Friday that would prompt only a “little pause” in the central bank’s rate hike plans.
“If today’s decline in the unemployment rate doesn’t reverse itself they may be compelled not only to hike but also to signal a faster pace of future tightening,” said Michael Feroli, an economist at JPMorgan in New York.
Other measures also showed labor market slack shrinking. The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, held at an 11-month high of 63 percent in March.
A broad measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, fell three-tenths of a percentage point to 8.9 percent, the lowest level since December 2007.
The employment-to-population ratio increased one-tenth of a percentage point to a fresh eight-year high of 60.1 percent.
Last month, construction jobs rose 6,000, the weakest gain since August, after robust increases in January and February. Manufacturing employment advanced by 11,000 jobs, slowing from the 26,000 positions created in February.
Retail payrolls fell 29,700, declining for a second straight month. Employment at clothing retailers decreased by 5,800 jobs last month and general merchandise stores shed 34,700 positions. Retailers including J.C. Penney Co Inc and Macy’s Inc have announced thousands of layoffs as they shift toward online sales and scale back on brick-and-mortar operations.
Leisure and hospitality payrolls increased 9,000, a third of February’s job gains, as employment at amusement parks fell 6,900. Government payrolls increased 9,000 as state and local government hiring offset a 1,000 drop in federal jobs. -Reuters