Surprise jump in US jobs sends unemployment to four-year low
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Friday 08 March 2013
The United States added 236,000 jobs last month, far exceeding expectations, as the unemployment rate in the world's largest economy improved to a four-year low.
Although official non-farm payroll figures released today showed that January's jobs gains were lower than initially thought, easing to 119,000 from an initial estimate of 157,000, the February report surpassed forecasts of 160,000 new jobs. The result was that the unemployment rate fell from 7.9 per cent in January to 7.7 per cent last month – the lowest since December 2008.
The improvement was down to a combination of new jobs being added in the economy, and people exiting the labour force.
The figures come against the backdrop of hefty gains on the stock market. Boosted by reassurances from the Federal Reserve that it will not roll back its stimulus measures anytime soon, traders have kept the Dow Jones index at an all-time high. So while the jobs figures are positive for economic health, they could impact sentiment on the markets as investors wonder whether the Fed will use the improving labour picture to tighten monetary policy earlier than expected.
The central bank's bond-buying programme is currently worth some $85bn a month. Interest rates remain near zero, and the Fed has said that it will not budge on that until unemployment falls to 6.5 per cent, which remains a distant prospect.
Meanwhile, the US economy faces a number of pressures. Earlier this year, hundreds of millions of ordinary Americans had to endure the expiration of a 2 per cent tax cut, while some $85bn of government spending cuts came into force at the beginning ofthis month. The latter measure alone is likely to shave 0.5 per cent off the 2 per cent growth forecastfor the US this year.
Economists forecast that to put the labour market on an even keel and bring unemployment down significantly, the US needs to see a sustained period where 250,000 jobs are added in the economy each month.
Among factors behind February's gain was a sharp increase in construction employment, up by 48,000, compared with 25,000 in January. This reflects the recent strength in the US housing and construction market, propped up by stimulus measures.
The White House presented the jobs data as evidence that an economic turnaround was taking root. "While more work remains to be done, today's employment report provides evidence that the recovery that began in mid-2009 is gaining traction," Alan Krueger, the chairman of the White House council of economic advisers, said.
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