US employers created the smallest number of jobs for more than a year in March, fanning fears that a strong dollar and weak oil price are taking their toll on the world’s largest economy.
Much weaker than expected employment figures pushed back traders’ bets on an interest rate rise from the US Federal Reserve from this summer to later in the year. Some analysts said the central bank could even wait until 2016 to tighten policy.
The key non-farm payrolls report showed 126,000 jobs were added in March, almost half the number economists had been predicting and the slowest job creation since December 2013. The bad news was compounded by revisions to January and February data suggesting 69,000 fewer jobs were added than previously thought.
March’s surprise slowdown brought to an end 12 straight months of job gains of more than 200,000, the longest such streak for two decades.
That overshadowed more positive news on wages, a drop in long-term joblessness and the headline unemployment rate holding steady at 5.5%.
“The US economy has been adding jobs at a strong pace in the past three years, but this report was on the weaker side. Job growth has averaged 197,000 in the last three months. So this month’s figure was quite disappointing,” said Tanweer Akram, senior economist at Voya Investment Management. The data reinforced his view that long-term interest rates would stay low this year, Akram added.
US rate-setters, led by the Fed chief Janet Yellen, are being closely watched around the world for clues on when a long period of ultra-loose monetary policy will come to a close. After years of low borrowing costs in the wake of the global financial crisis it is widely expected the Fed will be the first major central bank to start raising interest rates.
Economists are divided, however, over when the Fed will start to tighten and whether recent signs of economic sluggishness are down to one-off factors such as the harsh winter weather and falling oil prices, or a symptom of more fundamental weakness.
But the US labor secretary, Thomas Perez, remained upbeat.
“While March’s numbers aren’t as robust as we’ve seen over the last year, overall trends remain solid, and there is every reason to be optimistic about our economic trajectory going forward,” he said.
The Labor Department figures signalled some pressure on businesses from a strong dollar, which makes US exports more expensive, with the goods-producing sector (which includes energy and construction as well as manufacturing) shedding 13,000 jobs in March – the biggest drop for almost two years. In particular, there was evidence of the recent sharp falls in oil prices hitting employment in the extractive sector, with mining shedding more than 11,000 jobs last month.
But some economists noted that the volatile nature of the payrolls data meant markets should not read too much into March’s report.
The jobs numbers were “clearly a bad miss”, said James Knightley, economist at ING Financial Markets, but had been distorted by bad weather as well as by disruption to ports on the west coast from industrial action.
“With these factors having dissipated, we expect the hard data to bounce back in the next few months and the payrolls figures to also recover. Indeed, the strength in consumer confidence offers clear encouragement for this view,” said Knightley.
“Consequently, a June rate hike from the Federal Reserve remains on the agenda, but we need to see the rebound come through quickly.”
The report showed the unemployment rate holding steady at 5.5% as more people left the workforce. But a wider measure of underemployment fell to its lowest for more than six and a half years. The measure, which includes people who want to work but have given up searching for a job as well as those working part-time but wanting full-time jobs, eased down to 10.9% in March from 11% in February.
The government also reported a pick-up in wages in March. Average hourly earnings increased by 7 cents for all private-sector employees in March, and nominal hourly wages were up 2.1% on a year ago.
But Perez said more progress was needed on pay. “Wage growth remains the unfinished business of this recovery. While Wall Street employees are collectively taking home billions of dollars just in bonuses, minimum wage workers haven’t had a raise since 2009,” he said in a statement on the jobs report.
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