The economy in the U.S. showed signs of emerging from the effects of the winter storms that have curbed growth in early 2014 as employers added more workers than projected in February.
The 175,000 gain in payrolls followed a 129,000 increase the prior month that was bigger than initially estimated, Labor Department figures showed yesterday in Washington. The jobless rate rose to 6.7 percent from 6.6 percent as the number of people entering the job market swamped the quantity of positions available.
The pickup following the weakest two-month hiring gain in more than a year shows employers remain confident the economic expansion will recover after winter storms slowed consumer spending. Yields on Treasury securities jumped as the report probably also means Federal Reserve policy makers will continue to trim monthly bond purchases aimed at spurring growth.
“February was a step in the right direction, but the full rebound is yet to come,” said Harm Bandholz, chief U.S. economist at UniCredit Group in New York, who correctly projected the employment gain and is among the best payroll forecasters in the past two years, according to data compiled by Bloomberg. It “leaves no doubt that the Fed will continue to taper by $10 billion.”
Stocks rose, with the Standard & Poor’s 500 Index erasing losses to close at a record, as the data overshadowed concern the situation in Ukraine could worsen. The S&P 500 climbed less than 0.1 percent to 1,878.04 in New York. The yield on the benchmark 10-year Treasury note climbed to 2.79 percent from 2.74 percent late on March 6.
The median forecast of 93 economists in a Bloomberg survey called for a 149,000 advance in U.S. payrolls last month. Estimates ranged from gains of 100,000 to 220,000. The U.S. added 194,000 jobs each month on average last year.
Revisions to prior reports added a total of 25,000 jobs to payrolls in the previous two months. The 106,500 gain on average in December and January was the weakest over a two-month period since May-June 2012.
Lowe’s Cos. is among companies boosting headcount, setting the stage for further gains in employment as Americans return to stores once temperatures turn more seasonable.
Mooresville, North Carolina-based Lowe’s announced Feb. 19 that it will be adding about 25,000 seasonal employees this year for the industry’s busiest season. Home Depot Inc. said it will add 80,000 positions for the spring and summer, matching 2013.
“Stronger job and income growth should create a more favorable environment for consumer spending,” Robert Niblock, Lowe’s chief executive officer, said on a Feb. 26 earnings call.
Accumold LLC near Des Moines, Iowa, is among companies bringing on workers as demand improves, Chief Executive Officer Roger Hargens said in an interview.
“Our international customers are really growing well, but our domestic customers are stronger than they have been in a long time,” said Hargens, whose company makes parts for automakers and military contractors, among others. At the end of 2013, Accumold had 190 workers, and it’s looking to add another 40 to 60 this year, he said.
While the increase in the jobless rate put the figure further away from the Fed’s threshold of 6.5 percent for raising interest rates, the central bank still faces a challenge in communicating its intentions to investors.
Even as Fed Chair Janet Yellen reiterated the 6.5 percent threshold in testimony before the Senate Banking Committee Feb. 27, the Federal Open Market Committee debated “the reliability of the unemployment rate as an indicator of overall labor-market conditions,” minutes of Fed officials’ last meeting showed.
Labor-market improvement is one reason why policy makers have dialed back monthly bond buying by $10 billion at each of their past two meetings.
“They’re still, for all intents and purposes, extremely close to the 6.5 percent threshold,” said Benjamin Mandel, an economist at Citigroup Inc. in New York, who formerly worked at the New York Fed. “They’ve been taking small steps away from that threshold and you’d expect them to continue to distance themselves from it.”
The Labor Department’s report showed hiring at professional and business services increased by the most in a year, while payrolls rebounded in education and health services. State and local government agencies, factories and construction firms also added to headcounts last month.
“It’s a pretty good report, given the weather,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, who correctly predicted the gain in payrolls. “You had a pretty good rise in average hourly earnings, you had some good gains in jobs in a couple of different sectors.”
Cassandra Summons is among those who had success finding work. Summons, who is older than 50 and lives near Dayton, Ohio, started a new job last week as a compliance specialist after five months of searching.
“It was hard to deal with, because I was the breadwinner in the family,” Summons said. She applied for about 100 jobs before landing her new position and ultimately found work through a church group.
“It was a challenge,” she said. “The time of year might have had something to do with it: the Christmas holidays, the cold weather, and we had a lot of snow here this year, and that contributed to the delay.”
Last month’s bad weather probably had the biggest impact on the length of the workweek. The number of hours worked by all employees dropped to 34.2 on average in February, the least since January 2011, according to the Labor Department’s data.
The survey of households, from which the unemployment rate is calculated, showed almost 6.9 million people worked less than a full week, the most for any February since record-keeping began in 1978, the Labor Department said.
Yesterday’s figures also showed 601,000 Americans weren’t at work because of weather during the survey week, the most for the month since 2010, the agency said. The elements can affect the payroll count if employees didn’t receive compensation for the entire pay period that included the 12th of month.
The week ended Feb. 15 was the coldest second week of February since 2011, according to weather-data provider Planalytics Inc. The South Atlantic region of the U.S. experienced the most snowfall since 1983 and New England registered the most in 20 years during the period, the Berwyn, Pennsylvania-based firm said. February’s winter blitz followed the chilliest January in three years.
Wages were another bright spot in yesterday’s report. Hourly earnings for all workers climbed by 9 cents, or 0.4 percent, on average to $24.31 last month, marking the biggest gain since June. Average weekly pay increased to $831.40 from $830.75.
“Overall, it’s still very weak wage growth, but maybe we’re beginning to turn a corner,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, and a former researcher at the central bank.