US employment growth accelerated from a 17-month low in March as milder weather boosted hiring in sectors like construction, which could further allay fears of an abrupt slowdown in economic activity in the first quarter.
Worsening worker shortages and lingering effects of tighter financial market conditions at the turn of the year, however, left job growth below 2018’s brisk pace. The Labour Department’s closely watched monthly employment report on Friday also showed a small upward revision to February’s meagre job gains.
Wage increases also slowed in March and more people dropped out of the labour force, leaving the report broadly supportive of the Federal Reserve’s decision last month to suspend its three-year campaign to tighten monetary policy. The US central bank dropped projections for any interest rate hikes this year after increasing borrowing costs four times in 2018.
‘This was a Goldilocks report, with a rebound in job growth to calm fears of an imminent recession, and wage growth that was solid enough without triggering inflationary concerns,’ said Curt Long, chief economist at the National Association of Federally-Insured Credit Unions. ‘The Fed will be pleased, as it supports their present stance of holding firm on rates.’
Nonfarm payrolls rose by 196,000 jobs last month. Data for February was revised modestly up to show payrolls advancing by 33,000 jobs instead of the previously reported 20,000. February job gains were the smallest since September 2017.
The economy has shifted into lower gear as stimulus from the Trump administration’s $1.5 trillion tax cut package as well as increased government spending fades. A trade war between Washington and Beijing, and slowing global growth have also taken a toll on the economy, which in July will celebrate 10 years of expansion, the longest on record.
Economists polled by Reuters had forecast payrolls increasing by 180,000 jobs last month. The dollar slipped against a basket of currencies on the data, while US Treasury prices trimmed losses. US stock index futures extended gains.
The employment report added to fairly upbeat construction spending and factory data that led Wall Street banks to boost their growth estimates for the first quarter.
Growth forecasts for the first quarter are between a 1.4 per cent and 2.1 per cent annualised rate. The economy grew at a 2.2 per cent rate in the fourth quarter, stepping down from the July-September quarter’s brisk 3.4 per cent pace.
Average hourly earnings increased by four cents, or 0.1 per cent in March after jumping 0.4 per cent in February.
That lowered the annual increase in wages to 3.2 per cent from 3.4 per cent in February, which was the biggest gain since April 2009. Modest wage growth could raise concerns about consumer spending after consumption stalled in January.
The unemployment rate was unchanged at 3.8 per cent in March, close to the 3.7 per cent that Fed officials project it will be by the end of the year.
Though monthly job gains have moderated from an average of about 223,000 in 2018, they remain above the roughly 100,000 per month needed to keep up with growth in the working-age population.
There are about 7.58 million open jobs in the economy. Vacancies could remain elevated as 224,000 people dropped out of the labour force last month. The labour force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 63.0 per cent in March from 63.2 per cent in February, which was the highest in more than five years.
Economists expect job growth to average about 150,000 per month this year. Employment at construction sites rebounded by 16,000 jobs in March after falling by 25,000 in February. Leisure and hospitality sector payrolls accelerated by 33,000 jobs last month, driven by a 27,300 increase at restaurants and bars.
The manufacturing sector lost 6,000 jobs in March, the first decline in factory payrolls since July 2017. Factory payrolls rose 1,000 in February. Employment at motor vehicle assembly plants fell by 6,300 jobs last month.
Auto manufacturers have announced thousands of job cuts to deal with slowing sales that have led to an inventory bloat.
Professional and business services employment increased by 37,000 jobs last month. The government added 14,000 jobs in March. There were increases in healthcare, transportation and warehousing employment, as well as financial activities, utilities and information industries.
But retail payrolls fell for a second straight month in March. The length of the average workweek rose to 34.5 hours from 34.4 hours in February.
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