US jobs data strong as unemployment stays low
Federal Reserve remaining cautious about raising US interest rates
US employment increased solidly in March and wages rebounded, underscoring the economy’s resilience, but the Federal Reserve is expected to remain cautious in raising interest rates this year due to slowing global growth.
Nonfarm payrolls increased 215,000 last month, the Labor Department said on Friday. Data for January and February were revised slightly down to show 1,000 fewer jobs created than previously reported.
Average hourly earnings increased seven cents. While the unemployment rate rose to 5.0 per cent from an eight-year low of 4.9 per cent, it was because more Americans continued to return to the labour force, a sign of confidence in the jobs market.
The labour market has largely shrugged off slowing global economic growth, a robust US dollar that has hurt manufacturing exports, and cheap oil prices, which have hit energy sector profitability.
March’s strong employment report will likely have little impact on monetary policy in the near-term, with the Fed appearing to be more focused on international developments.
“It was another solid report. As far as the Fed is concerned, it doesn’t change anything for them. I think given what we heard this week from (Fed Chair Janet) Yellen ... their focus is elsewhere,” said Curtis Long, chief economist at the National Association of Federal Credit Unions in Washington.
Yellen said on Tuesday that slowing world growth and lower oil prices posed a downside risk to the US economic outlook, adding that she considered it appropriate for policymakers to “proceed cautiously in adjusting policy.”
Fed officials last month downgraded their economic growth expectations and forecast only two more rate hikes this year. The US central bank raised its benchmark overnight interest rate in December for the first time in nearly a decade.
Financial markets see a 30 per cent chance of a hike at the Fed’s June policy meeting, a 50 per cent chance of such a move in September and a 64 per cent probability at the December meeting, according to CME FedWatch.
Economists polled by Reuters had forecast nonfarm payrolls increasing 205,000 in March and the unemployment rate holding steady at 4.9 per cent.
US Treasury prices fell after the data as did short-term interest rate futures. The dollar rose against a basket of currencies, while US stock index futures slightly pared losses.
The employment report came on the heels of recent data showing sluggish consumer spending and weak business investment on capital in the first two months of the year, as well as some deterioration in the international trade balance.
Those reports prompted economists to slash their first-quarter GDP growth estimates to as low as a 0.9 per cent annualized pace from as high as a 2.0 per cent rate. The economy grew at a 1.4 per cent rate in the fourth quarter.
Though employment gains have slowed after averaging 282,000 jobs per month in the fourth quarter, there is little labour market strain from the global slowdown, which helped to ignite a massive stock market sell-off at the start of the year.
Wages increased last month, with average hourly earnings rising 0.3 per cent. That lifted the year-on-year earnings gain to 2.3 per cent from 2.2 per cent in February.
Economists say wage growth of between 3.0 per cent and 3.5 per cent is needed to lift inflation to the Fed’s 2.0 per cent target. Though the Fed’s preferred inflation measure is currently at 1.7 per cent, Yellen has expressed scepticism over the sustainability of gains, citing transitory factors.
The labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, rose a tenth of a percentage point to 63 per cent in March, the highest level since March 2014. It has increased 0.6 percentage point since dipping to 62.4 per cent in September.
A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment rose to 9.8 per cent last month from a more than 7-1/2-year low of 9.7 per cent.
Employment gains in March were broad-based. But manufacturing lost 29,000 jobs, the largest number since December 2009, despite signs of stabilisation in the factory sector.
Mining purged 12,000 more jobs last month. Mining payrolls have declined by 185,000 jobs since peaking in September 2014, with three-fourths of the losses in support activities.
Oilfield services providers Schlumberger and Halliburton have announced thousands of job cuts as they try to cope with reduced profits from a prolonged slump in oil prices.
Construction payrolls rose 37,000, increasing for a ninth straight month. Retail employment surged 47,700 after rising strongly in January and February despite weak sales. Government payrolls increased 20,000 last month.