Payroll gains slow, U.S. jobless rate at lowest since 2007
(Bloomberg) — U.S. payroll gains slowed in March while the jobless rate unexpectedly dropped to the lowest in almost a decade, suggesting the labor market is returning to a more sustainable pace of progress.
The 98,000 increase followed a 219,000 rise in February that was less than previously estimated, a Labor Department report showed Friday in Washington. The median forecast in a Bloomberg survey of economists called for a 180,000 advance. The unemployment rate fell to 4.5% from 4.7%, and wage gains slowed to a 2.7% year-over-year pace.
While the payroll figures are the weakest since last May and represent a pullback from the first two months of the year, it may reflect that things are getting back to normal. Employment has been on a healthy run, giving Federal Reserve policy makers enough confidence to raise interest rates in March and forecast two more hikes this year. Businesses have been challenged by a dwindling pool of unemployed, and are gradually giving in to pressures to raise wages in order to attract and retain talent.
“Even if payrolls are slowing down, I’m not sure that that means the labor market is weakening,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC. “To the extent that it is slowing down or going to slow down, it’s probably more a function of tight supply than weakening demand.”
The March payroll gains compare with last year’s average of 187,000 a month, a pace that analysts had forecast to decline to 181,000 in 2017. Revisions to the previous two months subtracted a total of 38,000 jobs from payrolls, making for an average first-quarter rise of 178,000 a month.
President Donald Trump has set a goal of adding 25 million jobs over 10 years, which would require additions of 208,000 a month, or 2.5 million positions a year.
Hiring tends to show large swings around weather disturbances, and the March report has two such issues to contend with: a storm during the payrolls survey week that dumped 10 to 20 inches over a large swath of the Northeast, and more-seasonal temperatures after an unusually warm February.
Tepid consumer spending in the first quarter has offered other evidence of slowing demand, however. Personal spending barely advanced in February and demand for autos slowed in March. A second-quarter rebound could depend on strengthening in the labor market.
The wage figures continue to indicate steady gains without a rapid pickup. Average hourly earnings rose 0.2% from the previous month, compared with 0.3% in February, which was up 2.8% from a year earlier. The average workweek was unchanged at 34.3 hours in March.
The unemployment rate represented the lowest level since May 2007. Analysts had estimated it would be unchanged at 4.7%.
March payroll estimates from economists surveyed by Bloomberg ranged from gains of 100,000 to 267,000. February was initially reported as a 235,000 increase.
Last month’s increase in payrolls was led by providers of professional and business services, which added 56,000 jobs. Retailers cut around 30,000 positions for a second month amid reports of store closings, while gains in construction and manufacturing eased.
Amherst Pierpont’s Stanley attributed some of the weakness in payrolls to weather and pinned the retail jobs loss on “more likely structural changes in the economy,” as more Americans shop online instead of at brick-and-mortar stores.
Factories increased payrolls by 11,000 after a 26,000 rise the month before, compared with a survey released earlier this week that showed manufacturing employment surged in March at the strongest pace since June 2011.
Construction payrolls rose by just 6,000 after a 59,000 increase.
Total private employment, which excludes government agencies, rose by 89,000 after a 221,000 increase the prior month.
Government employment rose by 9,000. Federal payrolls dropped by 1,000 in the second full month of the Trump administration’s hiring freeze for agency employees not involved in national security. State and local agencies added 10,000 positions.
Trump continues to emphasize job-market indicators that measure slack, including the number of Americans who have given up looking for work and therefore aren’t counted in the labor force. The number of discouraged workers fell by 62,000 in March to 460,000.
Fed officials view the economy as “operating at or near maximum employment” though they’re somewhat divided over the extent of slack that remains in the labor market, according to minutes of their March meeting.
The labor-force participation rate, which indicates the share of working-age people who are employed or looking for work, was unchanged at 63%. It touched 62.4% in 2015, the lowest since the 1970s.
The underemployment rate, a measure that includes those working part-time who would take a full-time job if it were available, fell to 8.9%, the lowest since December 2007, from 9.2% in February. The number of people working part-time who would prefer a full-time job fell by 151,000 to 5.55 million.