US jobs market shakes off winter's icy grip
US employers hired at a brisk pace last month and ramped up the hours their workers put in on the job, the strongest signals yet the economy was breaking free of its winter doldrums. At the same time, the jobless rate held near a five-year low even as Americans poured into the labour market to hunt for work, another upbeat signal of the economy's health.
Copyright Reuters, 2014
"It is strong enough to indicate the economy is back on track, but not so robust that the Federal Reserve would have to start thinking about actually raising rates," said Joel Naroff, head of Naroff Economic Advisers in Holland, Pennsylvania. Nonfarm payrolls increased by 192,000 jobs last month after rising by 197,000 in February, the Labour Department said on Friday. The unemployment rate was unchanged at 6.7 percent.
The government's closely-watched report showed private sector employment finally regaining its pre-recession peak as the economy accelerated. It added to data ranging from manufacturing and services sector activity to automobile sales that have signalled strength as the first quarter ended. An unusually brutal winter slammed the economy at the end of 2013 and the start of this year. Growth was further undercut by efforts by businesses to trim inventories, the expiration of long-term jobless benefits and cuts to food stamps.
First-quarter growth estimates range as low as a 0.6 percent annual rate. But economists think growth in the second quarter will be near 3 percent. "The report suggests the first quarter ended with improving momentum and that momentum will likely carry over into second quarter GDP growth," said Robert Hughes, a senior research fellow at the American Institute for Economic Research in Great Barrington, Massachusetts.
The pace of hiring in March was close to Wall Street's expectations, but the count for the prior two months was revised to show 37,000 more jobs were created than previously reported. With payrolls and the workweek both rising, a measure of total work effort jumped by the most in more than seven years. Job growth had fallen off sharply in December. While the pace of hiring found by the government's latest survey of employers was a welcome relief, it nevertheless suggested the economy was simply regaining its modest growth track.
The smaller household survey used to calculate the jobless rate, however, showed a much larger surge in employment. That jump was met by a rise in the number of people entering the labour force, a show of confidence in the jobs market. The labour force participation rate, or the proportion of working-age Americans who have a job or are looking for one, hit a six-month high of 63.2 percent. An even broader gauge of labour market health, the percentage of working-age Americans with a job, reached its highest level since the summer of 2009.
The economy's return to a steady pace of job gains should comfort the Fed as it scales back its bond-buying stimulus. However, the still-high level of unemployment should bolster its resolve to keep overnight interest rates near zero for a while. Fed Chair Janet Yellen has pointed to the unusually large number of Americans who are either suffering a long spell of unemployment or who are working part-time because they are unable to find full-time work as justification for maintaining an extraordinarily easy monetary policy.
The number of Americans who had looked for work for at least six months fell by about 100,000 in March to 3.7 million, but the number working part-time for economic reasons rose modestly. "Yellen's dashboard still suggests there is a substantial amount of slack in the labor market," said Bricklin Dwyer, an economist at BNP Paribas in New York. "The Fed has ample room to pursue accommodative policy and we expect patience on rates."
Some economists had argued a jump in earnings in February could signal a tightening in the jobs market that the Fed might want to monitor closely. However, average hourly earnings for private employees fell back in March, as did a narrower gauge that had been rising more swiftly.
The private sector accounted for all the new jobs in March and gains were broad-based. Manufacturing payrolls fell by 1,000, breaking a string of seven monthly increases. But the average workweek in manufacturing rebounded to 41.1 hours in March, the highest level since the Labor Department started publishing the series in 2006. With auto sales accelerating sharply in March, hiring could pick up in the months ahead. Construction employment increased by 19,000. It was the third consecutive month of job gains for the sector and occurred despite the housing market's struggles to climb out of a soft patch. Temporary jobs increased solidly in March, a good omen for future hiring.