US Job Growth Slows Sharply As Jobless Rate Falls

Weak job growth in March doesn’t keep unemployment rate from dipping.

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Reviewed by: Lucia Mutikani
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Edited by: Lucia Mutikani

Washington (Reuters) – U.S. employers added the fewest number of workers in 10 months in March, but a drop in the unemployment rate to a near 10-year low of 4.5% pointed to a labor market that continues to tighten.

Nonfarm payrolls increased by 98,000 jobs last month as the retail sector shed employment for a second-straight month, the Labor Department said on Friday, the fewest since last May.

The economy enjoyed job gains in excess of 200,000 in January and February as unusually warm temperatures pulled forward hiring in weather-sensitive sectors like construction, leisure and hospitality.

Weather A Factor In March

In March, temperatures dropped and a storm lashed the Northeast.

The unemployment rate fell two-tenths of a percentage point to 4.5%, the lowest level since May 2007. Economists polled by Reuters had forecast payrolls increasing 180,000 last month and the unemployment rate unchanged at 4.7%.

The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population. The labor market is expected to hit full employment this year, which could drive faster wage growth.

The weak payrolls gain could raise concerns about the economy's health especially given signs that gross domestic product slowed to around a 1.0% annualized growth pace in the first quarter after rising at a 2.1% rate in the fourth quarter.

 

Wage Growth Slows

Average hourly earnings in March increased 5 cents, or 0.2%, which lowered the year-on-year increase to 2.7%.

Given rising inflation, the moderate job gains and gradual wage increases could still keep the Federal Reserve on course to raise interest rates again 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 hikes this year. The Fed has said it would look at how to reduce its portfolio of bond holdings later this year.

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% in March.

Retail Job Losses Quicken

Economists attribute some of the improvement in the participation rate to President Trump's electoral victory last November, which might have caused some unemployed Americans to believe their job prospects would improve. Trump has pledged to pursue pro-growth policies such as tax cuts and deregulation.

Construction jobs increased by 6,000 after robust gains in January and February. Manufacturing employment gained 11,000 jobs as rising oil prices fuel demand for machinery.

Retail payrolls fell 29,700, declining for a second-straight month. Retailers including J.C. Penney and Macy's have announced thousands of layoffs as they shift toward online sales and scale back brick-and-mortar operations.

Government payrolls increased by 9,000 despite a freeze on the hiring of civilian workers.

 

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