US private jobs see biggest surge in six years

WASHINGTON: Hiring by US private employers surged in February, suggesting that the economy remains on solid ground even as growth appears to have slowed further in the first quarter.
The ADP National Employment Report showed on Wednesday that private payrolls grew by 298,000 jobs last month, well above economists’ expectations for a gain of 190,000. January’s private payrolls gains were revised up to 261,000 from 246,000.
Signs of sustained labour market strength could encourage the Federal Reserve to hike interest rates next week. Fed Chair Janet Yellen signalled last week that the US central bank would likely raise rates at its March 14-15 policy meeting.
The ADP report, jointly developed with Moody’s Analytics, came ahead of the release on Friday of the US Labor Department’s more comprehensive employment report.
The ADP report, however, has a poor track record predicting the private payrolls component of the government’s employment report. According to a Reuters survey of economists nonfarm payrolls likely increased by 190,000 jobs in February after rising by 227,000 in January.
The unemployment rate is forecast edging down to 4.7 per cent from 4.8 per cent in January. The economy grew at a 1.9 per cent annualised rate in the fourth quarter, slowing from the third quarter’s brisk 3.5 per cent pace.
Data on trade, consumer, business and construction spending were soft in January. As a result, the Atlanta Fed is forecasting GDP increasing at a 1.3 per cent rate in the first quarter.
Prices of US Treasuries were trading lower after the data, while US stock indexes were mixed. The dollar was stronger against a basket of currencies.
In a separate report on Wednesday, the Labor Department said nonfarm productivity, which measures hourly output per worker, rose at an annualised 1.3 per cent rate in the final three months of 2016, as it had estimated last month.
Weak productivity suggests it will be hard to significantly boost economic growth. President Donald Trump has pledged to boost annual growth to 4 per cent. The economy has not achieved 3 per cent annual growth since the 2007-2009 recession ended.
Productivity grew at a 3.3 per cent pace in the third quarter. It increased 0.2 per cent in 2016, the smallest gain since 2011, after rising 0.9 per cent in 2015.
Sluggish productivity has boosted employment growth as companies hire more workers to maintain output, partially explaining the divergence between payroll gains and economic growth. The economy grew 1.6 per cent in 2016, while job growth averaged 187,000 per month.
Productivity has increased at an average annual rate of 0.6 per cent over the last five years, well below its long-term rate of 2.1 per cent from 1947 to 2016. — Reuters