Unemployment Rate Falls to Near 10-year Low of 4.5 Percent

A fast food restaurant advertises for workers on its front window in Encinitas, California. REUTERS/Mike Blake
A fast food restaurant advertises for workers on its front window in Encinitas, California. REUTERS/Mike Blake

U.S. job growth slowed sharply in March amid continued layoffs in the retail sector, but a drop in the unemployment rate to a near 10-year low of 4.5 percent suggested labor market strength remained intact.

Nonfarm payrolls increased by 98,000 jobs last month, the fewest since last May, the Labor Department said on Friday.

Job gains, which had exceeded 200,000 in January and February, were also held back by a slowdown in hiring at construction sites, factories and leisure and hospitality businesses, which had been boosted by unusually warm temperatures earlier in the year.

In March, temperatures dropped and a storm lashed the Northeast, and economists said bad weather accounted for the stepdown in hiring. The two-tenths of a percentage point drop in the unemployment rate from 4.7 percent in February took it to its lowest level since May 2007.

“We are not worried about the health of the labor market,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York. “After unusually mild conditions had boosted employment gains during the past few months, we now witnessed a payback, as temperatures normalized and a snowstorm hit some parts of the country.”

While the bigger establishment survey showed fewer jobs created last month, the smaller and more volatile survey of households showed employment increased 472,000. The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

The labor market is expected to hit full employment this year. Economists polled by Reuters had forecast payrolls increasing 180,000 last month and the unemployment rate unchanged at 4.7 percent.

The dollar was trading higher against a basket of currencies, while prices for U.S. Treasuries rose.


Job growth averaged 178,000 per month in the first quarter. That suggests an apparent slowdown in gross domestic product growth to around a 1.0 percent annualized pace in the first three months of the year is temporary. The economy grew at a 2.1 percent rate in the fourth quarter.

Average hourly earnings increased 5 cents or 0.2 percent in March after rising 0.3 percent in February. That lowered the year-on-year increase in wages to 2.7 percent.

Given rising inflation, the moderate job gains and gradual wage increases could still keep the Federal Reserve on course to raise interest rates again in June.

The U.S. central bank lifted its overnight interest rate by a quarter of a percentage point in March and has forecast two more hikes this year. The Fed has said it would look at how to reduce its portfolio of bond holdings later this year.

“I think for the Fed, it doesn’t change all that much in the near-term outlook. They were not going to go in May, and there are still going to be two more employment reports before the June meeting,” said Mark Cabana, head of U.S. short rates strategy at Bank of America Merrill Lynch in New York.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, held at an 11-month high of 63 percent in March.

A broad measure of unemployment, that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, fell to 8.9 percent, the lowest level since December 2007, from 9.2 percent in February.

The employment-to-population ratio increased one-tenth of a percentage point to 60.1 percent, the highest since February 2009.

Last month, construction jobs increased 6,000, the weakest since August, after robust gains in January and February. Manufacturing employment gained 11,000 jobs, slowing from the 26,000 positions created in February.

Retail payrolls fell 29,700, declining for a second straight month. Employment at clothing retailers declined by 5,800 jobs last month and general merchandise stores shed 34,700 positions. Retailers including J.C. Penney Co Inc and Macy’s Inc have announced thousands of layoffs as they shift toward online sales and scale back on brick-and-mortar operations.

Government payrolls increased 9,000 as state and local government hiring offset a decline in federal jobs.

(Reporting by Lucia Mutikani; Additional reporting by Sam Forgione in New York; Editing by Andrea Ricci)

SOURCE: Reuters