Job seekers and recruiters gather at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida
April 6, 2018
By Lucia Mutikani
WASHINGTON, (Reuters) – The U.S. economy created the fewest jobs in six months in March as the boost from mild temperatures faded, but a pickup in wage gains pointed to a tightening labor market, which should allow the Federal Reserve to raise interest rates further this year.
Nonfarm payrolls increased by 103,000 last month as construction and retail sectors shed jobs, the Labor Department said on Friday. That was the smallest amount since September and followed a 326,000 surge in February.
Temperatures returned to normal in March, with some snowstorms. Job growth is also moderating as the labor market hits full employment. There has been an increase in reports of employers, especially in the construction and manufacturing sectors, struggling to find qualified workers.
March’s job growth was below the 202,000 average of the past three months and close to the roughly 100,000 jobs per month needed to keep up with growth in the working-age population.
The unemployment rate held steady at 4.1 percent for a sixth straight month, even as people left the labor force.
Economists polled by Reuters had forecast the economy adding 193,000 jobs last month and the unemployment rate dropping to 4.0 percent.
With labor market slack diminishing, wage growth picked up a bit in March. Average hourly earnings rose eight cents or 0.3 percent last month after edging up 0.1 percent in February. The gain lifted the annual increase in average hourly earnings to 2.7 percent from 2.6 percent in February.
Economists say annual wage growth of at least 3 percent is needed to lift inflation toward the Fed’s 2 percent target. There is hope that wage growth will accelerate in the second half of the year and allow the Fed to continue raising interest rates.
The Fed increased borrowing costs last month and forecast two more interest rate hikes this year. Economists did not see an impact on hiring in the near-term from a recent stock market selloff, which has caused a tightening in financial conditions.
Financial markets have been spooked by fears of a trade war after the United States and China engaged in tit-for-tat tariffs.
Despite the slowdown in job growth in March, steady wage gains should support consumer spending amid signs gross domestic product growth moderated in the first quarter.
Growth estimates for the first quarter are mostly below a 2 percent annualized rate.
Growth in the January-March period tends to be weak because of a seasonal quirk. The economy grew at a 2.9 percent pace in the fourth quarter. Growth this year is seen boosted by a $1.5 trillion income tax cut package and increased government spending, which economists say will offset some of the impact from the stock market gyrations.
The unemployment rate has hovered at 4.1 percent since October as people piled into the labor market. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, slipped one-tenth of a percentage point to 62.9 percent in March after rising to a five-month high of 63.0 percent in February.
The return of cold weather and a shortage of skilled workers weighed on hiring at construction sites in March. Payrolls in the sector fell 15,000, the first drop since last July, after surging 65,000 in February.
Manufacturing employment increased 22,000. The retail sector shed 4,400 jobs after adding 47,300 positions in February.
Government employment rose by 1,000 jobs.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci) ((Lucia.Mutikani@thomsonreuters.com; +1-202-898-8315; Reuters Messaging: lucia.mutikani.thomsonreuters.com@reuters.net)
