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 Employers added 175,000 jobs to their payrolls last month after
creating 129,000 new positions in January, the Labor Department said
on Friday. The unemployment rate, however, rose to 6.7 percent from
a five-year low of 6.6 percent as Americans flooded into the labor
market to search for work.
"It reinforces the case for the economy being stronger than it's
looked for the last couple of months," said Bill Cheney, chief
economist at John Hancock Financial Services in Boston. "It makes
life easier for the Fed and feeds into continuing the tapering
process."
The report also showed the largest increase in average hourly
earnings in eight months and the payrolls count for December and
January was revised up to show 25,000 more jobs created during those
months than previously reported.
Investors on Wall Street cheered the report. U.S. stocks ended
mostly higher, with the Standard & Poor's 500 index closing at a
record. The dollar bounced off a four-month low, while prices for
U.S. Treasury debt fell, with the yield on the benchmark 10-year
note hitting a six-week high.
Interest rate futures showed that traders ramped up bets on the Fed
raising rates a bit sooner than had been previously thought. They
now point to a 54 percent probability of a rate hike in June 2015.
Unusually cold and snowy weather has disrupted activity in much of
the United States for months, and a few economists had begun to
speculate that the U.S. central bank could reconsider its plan to
wind down its bond-buying stimulus.
The eastern and central United States experienced record low
temperatures last month, and ice and snow blanketed densely
populated areas during the week employers were surveyed for February
payrolls. The winter storms left Wall Street bracing for a much
weaker report. Economists had forecast nonfarm payrolls rising by
only 149,000 jobs.
The weather, however, did have an impact. It cut into the length of
the average workweek, which hit its lowest level since January 2011
and led to a drop in a measure of total work effort. But economists
expect a reversal as soon as this month.
"The economy will defrost in the spring and heat up in the summer,"
said Michelle Meyer, a senior economist at Bank of America Merrill
Lynch in New York. "We should see solid gains in job growth in
coming months."
The smaller survey of households from which the unemployment rate is
derived showed 6.9 million people with jobs reported they were
working part-time because of the weather. That was the highest
reading for February since the series started in 1978.
It also showed 601,000 people could not get to work because of the
weather, the highest level for February since 2010. Economists said
job growth in February would have been as high as 200,000 if not for
the weather.
Payrolls averaged about 205,000 new jobs per month in the first 11
months of 2013, but that figure dropped to just 129,000 for
December, January and February.
GROWTH SLOWDOWN TEMPORARY
Fed officials, from Chair Janet Yellen on down, view the recent
economic weakness as largely weather-related and temporary. The
policymakers have suggested it does not meet the high bar they have
set in terms of what it would take for them to stop scaling back
their bond-buying stimulus.
The Fed has already reduced its monthly bond purchases by $10
billion at each of its last two meetings, and a similar reduction is
expected when officials next meet on March 18-19.
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But the weather is not the only factor behind the lull in activity.
Businesses are working through a huge pile of unsold goods
accumulated in the second half of 2013, which means they have no
incentive to place new orders with manufacturers.
In addition, the expiration of long-term unemployment benefits for
more than one million Americans in December and cuts to food stamps
are also hurting spending.
As a result of these temporary factors, growth in the first
quarter is expected to slow to an annual rate below 2 percent. The
economy grew at a 2.4 percent rate in the final quarter of 2013.
Economists welcomed the rise in the unemployment rate as a sign of
labor market strength, since it was driven by Americans taking up
the hunt for work.
"Evidently, the potential employees think the economy is improving
and there are more jobs to be had," said Sung Won Sohn, an economics
professor at California State University Channel Islands in
Camarillo, Calif.
A measure of underemployment that includes people who want a job but
who have given up searching and those working part-time because they
cannot find full-time jobs dropped to 12.6 percent, its lowest level
since November 2008.
Despite the improvement, the labor market is still far from a full
recovery. The percentage of working-age Americans with a job, a
broad gauge of labor market health, was steady at 58.8 percent last
month. It has not risen much since the recession ended nearly five
years ago.
In addition, the number of Americans who have been out of work for
more than six months rose in January.
Job gains last month were fairly broad-based, with private sector
payrolls rising 162,000 and government adding 13,000 jobs.
Manufacturing payrolls rose by 6,000 jobs, the seventh straight
monthly increase.
Construction payrolls, which surprised in January by logging hefty
gains, increased by 15,000 last month.
Insurance employment recorded its largest gain since July, possibly
boosted by implementation of President Barack Obama's signature
healthcare law. Healthcare payrolls also advanced.
There were, however, declines in retail, information and
transportation and warehousing employment.
Average hourly earnings rose nine cents.
"This gain, along with a rise in jobs, supports our case for better
real incomes in 2014 and, thereby, a better outlook for consumer
spending," said John Silvia, chief economist at Wells Fargo
Securities in Charlotte, North Carolina.
(Reporting by Lucia Mutikani; editing by
Tim Ahmann, Paul Simao and Chizu Nomiyama)
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