Weather dampens U.S. job growth;
unemployment rate drops to 4.5 percent
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[April 08, 2017]
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. job growth
slowed sharply in March amid continued layoffs in the embattled retail
sector, but a drop in the unemployment rate to a near 10-year low of 4.5
percent suggested labor market strength remained intact.
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.
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A fast food restaurant advertises for workers on its front window in
Encinitas, California. REUTERS/Mike Blake
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.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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