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 percent from an eight-year low of 4.9 percent, it was because more Americans continued to return to the labor force, a sign of confidence in the jobs market. The labor 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 percent chance of a hike at the Fed's June policy meeting, a 50 percent chance of such a move in September and a 64 percent 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 percent.
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 percent annualised pace from as high as a 2.0 percent rate. The economy grew at a 1.4 percent rate in the fourth quarter.
WAGES BOUNCE BACK Though employment gains have slowed after averaging 282,000 jobs per month in the fourth quarter, there is little labor 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 percent. That lifted the year-on-year earnings gain to 2.3 percent from 2.2 percent in February.
Economists say wage growth of between 3.0 percent and 3.5 percent is needed to lift inflation to the Fed's 2.0 percent target. Though the Fed's preferred inflation measure is currently at 1.7 percent, Yellen has expressed skepticism over the sustainability of gains, citing transitory factors. The labor 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 percent in March, the highest level since March 2014. It has increased 0.6 percentage point since dipping to 62.4 percent in September.
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