Millennium Post

USA’s year-old recovery stutters as job growth slows down sharply

The department also trimmed 69,000 from the two previous months, dimming the picture for growth after a year that averaged 287,000 new hires a month across the country. While the jobless rate held at 5.5 per cent, the lowest level since May 2008, and wages showed more strength than in recent months, the March data had other worrisome signs: hours worked fell, unemployment among all adult men and among African Americans rose, and the participation rate in the jobs market fell.

Hiring in the huge service sector slowed but still was a firm 142,000 new positions. But total jobs in government and in the goods-producing industries declined, with a notable net loss of 11,000 jobs in the mining sector as oil industry layoffs mount with the plunge in crude prices.

Economist Douglas Holtz-Eakin, former head of the Congressional Budget Office, called the report “awful”. “The headwinds of cold weather, higher dollar, and low oil prices are all good excuses for a bad month. But once again the economy has failed to shift to an anticipated higher gear 1 an ominous development,” he said.

The one good sign was in wages, a data point closely eyed by economists and the Federal Reserve for signs of labour market tightening and inflation. After coming in flat last month, average hourly wages rose by 7 cents to $24.86, a solid gain that put the year-on-year increase to 2.1 per cent, still modest but ahead of inflation.

Even so, analysts pointed out, average weekly hours worked fell, pulling down slightly average weekly earnings, a sign of relative weakness in economic growth. Economists noted a number of factors that could explain some of the weakness in March: harsh weather in some parts of the country, the very strong dollar, China’s economic slowdown, and the continuing effect of the West Coast ports slowdown between November and February.

“A range of factors, including the weather and the global economic slowdown, have affected economic data for the first quarter,” President Barack Obama’s Council of Economic Advisers Chairman Jason Furman said in a statement. Chris Low of FTN Financial pointed in a different direction. “For our money, it is the collapse of the oil economy and it likely will continue to weigh on activity” through the second quarter, he said.

Economists had forecast payrolls increasing 245,000 in March and the unemployment rate remaining at 5.5 per cent. Prices for US government debt rose as investors further pushed back their expectations for a Fed rate hike this year.

The US dollar fell against a basket of currencies and US stock index futures slipped. The US Federal Reserve Board, led by celebrated economist Janet Yellen, has appeared keen to raise its key overnight lending rate, which it has kept near zero since December 2008.

However, the economy’s recent softness has led investors to push back bets on the rate lift-off. Some believe the Fed may even wait until 2016 for an interest rate hike.

The paltry job gains could fan fears that the recent weakness in economic activity could be more fundamental rather than due to transitory factors. Until last month, the labor market had largely shrugged off a harsh winter, a buoyant dollar, weaker global demand and a now-resolved labor dispute at West Coast ports, which have combined to undermine economic activity in the first quarter.

Growth braked sharply over the past three months and gross domestic product (GDP) estimates for the first quarter are as low as a 0.6 perc ent annual pace. But the slowdown is expected to be temporary.

With Wal-Mart and McDonald’s announcing pay increases for their hourly workers, wage growth could gain some traction in the months ahead.
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