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Business News/ News / World/  Strong US jobs report unlikely to sway cautious Fed
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Strong US jobs report unlikely to sway cautious Fed

The labour market has largely shrugged off slowing global economic growth, a robust US dollar that has hurt manufacturing exports, and cheap oil prices

A file photo of employment seekers during a National Career Fairs job fair in Chicago. Photo: APPremium
A file photo of employment seekers during a National Career Fairs job fair in Chicago. Photo: AP

Washington: 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 labour 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% from an eight-year low of 4.9%, it was because more Americans continued to return to the labour force, a sign of confidence in the jobs market.

The labour 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% chance of a hike at the Fed’s June policy meeting, a 50% chance of such a move in September and a 64% 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%.

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% annualized pace from as high as a 2.0% rate. The economy grew at a 1.4% 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 labour 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%. That lifted the year-on-year earnings gain to 2.3% from 2.2% in February.

Economists say wage growth of between 3.0% and 3.5% is needed to lift inflation to the Fed’s 2.0% target. Though the Fed’s preferred inflation measure is currently at 1.7%, Yellen has expressed skepticism over the sustainability of gains, citing transitory factors.

The labour 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%age point to 63% in March, the highest level since March 2014. It has increased 0.6%age point since dipping to 62.4% in September.

A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment rose to 9.8% last month from a more than 7-1/2-year low of 9.7%.

Employment gains in March were broad-based. But manufacturing lost 29,000 jobs, the largest number since December 2009, despite signs of stabilization in the factory sector.

Mining purged 12,000 more jobs last month. Mining payrolls have declined by 185,000 jobs since peaking in September 2014, with three-fourths of the losses in support activities.

Oilfield services providers Schlumberger and Halliburton Co have announced thousands of job cuts as they try to cope with reduced profits from a prolonged slump in oil prices.

Construction payrolls rose 37,000, increasing for a ninth straight month. Retail employment surged 47,700 after rising strongly in January and February despite weak sales. Government payrolls increased 20,000 last month. Reuters

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Published: 01 Apr 2016, 06:59 PM IST
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