After months of strong job growth, hiring in March slowed sharply to its weakest level in over a year.
Employers added 126,000 net new jobs last month, just half of what economists had forecast and ending a yearlong streak of 200,000-plus job gains a month.
The unemployment rate in March held steady at a post-recession low of 5.5%, but only because the labor force shrank, with the number of new entrants dropping significantly.
Analysts said weather probably played a role in the unexpectedly weak jobs data released Friday by the Labor Department. But the report also reflected an economy slowed by declining exports, attributed partly to the strong dollar, as well as a pullback in investments in the energy sector as oil prices have tumbled. Manufacturing employment stalled last month, and payrolls in mining fell for the third straight month.
In an encouraging sign, the average hourly pay of workers picked up the pace last month, and there continued to be solid job gains in business services, which includes high-paying occupations such as architects and engineers. The retail sector also had a good month; it has now recovered all the jobs lost in the recession.
Still, on the whole, the March jobs data were considerably worse than anyone had expected. The report showed that average hours of work slipped last month. Government statisticians also revised downward payroll employment numbers for January and February by a combined 69,000. With those changes, job growth in the first quarter averaged a little less than 200,000 a month, down from 324,000 in the fourth quarter.
If the hiring weakness persists another month or two, it would give the Federal Reserve reason to delay its campaign to raise interest rates from their near-zero level, which some think could begin as early as June.
“With the downshift in job growth the Federal Open Market Committee is likely to hold off on any increase in the federal funds target rate until their September meeting,” said Gus Faucher, senior economist at PNC Financial Services Group. Previously, he said, PNC’s forecast had been for the first rate hike to come at the committee’s July meeting.
Faucher and many other economists, though, were not terribly concerned about the March employment numbers, viewing them as an aberration rather than an indication of the underlying trend. The hiring slowdown came after a yearlong string of robust job gains, with some months far exceeding expectations.
“Payrolls are always volatile even at the best of times, and we are coming off a run of almost unbelievably strong employment growth stretching back to last summer,” said Paul Ashworth, an economist at Capital Economics. Other labor market indicators, including jobless claims and new openings, look good, he said. “Accordingly, this is most probably another temporary blip.”
Michael Gapen, an economist at Barclays bank’s research arm, agreed. He predicted that job growth would average 200,000 to 225,000 a month over the rest of this year.
One indication that weather dampened hiring last month came from weakness in construction and restaurant businesses. The construction sector ended a run of 14 straight monthly job gains. Restaurants added 8,700 to their payrolls last month, less than one-fourth the average of the prior six months.
Retailers, meanwhile, took on almost 26,000 net new employers, with general merchandise stores leading the way. That pushed the total employee count for this sector above the previous high reached in December 2007 at the start of the Great Recession.
The pickup in retail hiring may indicate signs -- or at least hopes -- of stronger consumer spending in the spring and summer. Despite savings from low gas prices, household spending has been tame this year.
“As the year progresses I do expect the job market to continue to strengthen,” said Jack Kleinhenz, chief economist at the National Retail Federation. “The recent healthy job growth, better household balance sheets and elevated confidence should be just the formula consumers need to continue to spend and help propel economic growth even further.”
Whether consumers spend more, however, will also depend on having more money in their pockets. Friday’s report offered some hope that workers’ pay may be rising faster as the job market has gotten tighter.
Average hourly earnings for all private-sector workers rose 7 cents last month to $24.86, after a 3-cent bump in February. That raised by a notch the annual rate of pay increase to 2.1%.
Even so, that was just a little above inflation and, with workers putting in fewer hours on the job in March, their weekly earnings last month, on average, were flat.
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