WASHINGTON: The US economy created the fewest jobs in six months in March as a boost from milder temperatures faded, but a pickup in wage gains pointed to a tightening labour market, which should allow the Federal Reserve to further raise interest rates this year.
Nonfarm payrolls increased by 103,000 last month, with construction and retail sectors shedding jobs, the Labour Department said on Friday. That was the smallest gain since last September and followed a 326,000 surge in February, which was the largest in more than two years.
Temperatures returned to normal in March, with snowstorms in some parts of the country. The pullback in job gains is likely temporary as layoffs are at historic lows and other independent labour market indicators were strong in March.
“Inclement weather was the primary culprit for the slowdown in the pace of job growth in March,” said Joseph Song, an economist at Bank of America Merrill Lynch in New York.
Employment gains averaged 202,000 jobs per month in the first quarter, highlighting underlying labour market strength. The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.
The unemployment rate held steady at 4.1 per cent for a sixth straight month. Economists polled by Reuters had forecast the economy adding 193,000 jobs in March and the unemployment rate dropping to 4.0 per cent.
A broader measure of unemployment, which includes people who want to work but have given up searching, and those working part time because they cannot find full-time employment, fell two-tenths of a percentage point to 8.0 per cent last month.
With labour market slack diminishing, wage growth picked up a bit in March. Average hourly earnings rose eight cents or 0.3 per cent last month after edging up 0.1 per cent in February. The gain lifted the annual increase in average hourly earnings to 2.7 per cent from 2.6 per cent in February. Annual wage growth is inching closer to the pace of at least 3 per cent economists say is needed to lift inflation toward the Fed’s 2 per cent target.
Economists do not see an impact on hiring in the near term from the stock market sell-off, which has caused a tightening in financial conditions.
While the weather dampened hiring last month, it did not have an impact on hours worked. The average workweek held at 34.5 hours. That together with the modest job gains and increase in average hourly earnings boosted a proxy for take-home pay.
— Reuters
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