Weak jobs figures cast doubt over the strength of the US recovery yesterday as employers took on far fewer staff than expected in March.
The closely-watched monthly jobs report from the world’s biggest economy revealed employers added only 126,000 jobs – barely half the amount pencilled in by economists, and the lowest since December 2013. The disappointing figures also broke a year-long run in which private sector employers have taken on more than 200,000 staff a month.
The dollar also sank as the weak figures strengthened speculation that the US Federal Reserve chairman Janet Yellen would not press ahead with a first rate hike since 2006 until September at the earliest. Rates have been held at close to zero since the financial crisis in 2008.
Revisions to previous data also disappointed as private sector firms took on 69,000 fewer staff than expected in January and February. “It is clearly a bad miss,” ING Bank’s James Knightley said.
The unemployment rate remained at 5.5 per cent over the month. While the figures may have been dampened by an unusually cold March, experts said a stronger dollar had hit exports while cheaper petrol prices had yet to feed through to consumer spending. Gad Levanon, head of economics for the Conference Board – a US employers’ group – said: “The slew of disappointing news about consumption and investment in recent months might be catching up with employment. It is too early to conclude that job growth is slowing down, but it is a possibility.”
The detailed figures showed sectors including professional services, retailers and healthcare adding staff over the month, but US factories cutting 1,000 jobs – breaking a run of 19 months of hiring in a row. Building firms also shed staff for the first time in 15 months, while mining and oil drilling firms cut 11,000 staff.
Although stock markets were closed for Easter, the figures had an immediate impact in currency markets, sending the pound up almost a cent against the dollar, close to the $1.50 mark. Investors also piled into US Treasury debt as the prospect of a June hike receded. The jobs figures come after data last week showed the US economy growing at an annual pace of 2.2 per cent in the final three months of 2014, less than half the 5 per cent rate seen between July and September.
Jim Kochan, analyst at US bank Wells Fargo, said: “These numbers suggest we won’t see... the onset of policy normalisation until later this year. I still think there is a chance in June but I’m a lot less confident in that view now than yesterday.”
Yellen has stressed that even when the Fed begins raising rates, it will do so only very gradually. But unemployment at 5.5 per cent means she still has breathing space to wait, as US policymakers now view a jobless rate of between 5 per cent and 5.2 per cent as consistent with a healthy economy. Inflation in the US has sunk to 0 per cent, well below the Fed’s 2 per cent target.
Many Americans remain out of the workforce, partly because many baby boomers are reaching retirement age. The percentage of Americans who are either working or looking for work fell in March to 62.7 per cent, equalling the lowest rate since 1978.Reuse content