America’s employment boom fizzled in March.
Payrolls increased by 126,000 workers last month, the smallest gain since December 2013 and weaker than the most pessimistic forecast in a Bloomberg survey, a report from the Labor Department in Washington showed Friday. The advance over the prior 12 months averaged 269,000.
The smaller March reading may give Federal Reserve policy makers pause as they consider the timing of an interest-rate increase that Chair Janet Yellen has said will probably occur this year. The jobs data are now more in line with recent figures showing economic growth cooled in the first quarter as energy companies pulled back, the strong dollar and tepid overseas markets hurt manufacturers and rough winter weather restrained consumer spending.
“This is a soft print all the way around, no matter how you slice it,” said Omair Sharif, rates sales strategist at Societe Generale in New York. “It’s corroborating that the U.S. definitely hit a soft patch in the first quarter.
“Hiring just took a breather. I wouldn’t read this as anything other than that,” he said, adding that growth “should get back on track in the second quarter.”
Even with the moderation, employment opportunities are keeping Americans upbeat, laying the ground for a rebound in spending. The unemployment rate held at 5.5 percent, the lowest level since May 2008, and worker earnings improved, the report also showed.
Hourly pay was a silver lining, rising by 0.3 percent from the prior month and 2.1 percent from a year earlier and in line with the average since the expansion began in June 2009.
Yellen said at a March conference that the job market will continue to improve and that she expects the central bank will raise interest rates this year, with subsequent increases being gradual without following a predictable path.
“We’ve taken a bit of a dent in the recovery,” said Ethan Harris, co-head of global economics research at Bank of America Corp. in New York, and a former Fed analyst. At the same time, “the broader economy is not as weak as the recent numbers have suggested, and we expect wage pickup going forward. We think there’s going to be enough improvement that the Fed can tick the wage box, tick the labor market box, and raise rates sometime later in the year.”
The yield on the benchmark 10-year Treasury note dropped to 1.84 percent at 11:51 a.m. in New York from 1.91 percent late Thursday. The contract on the Standard & Poor’s 500 Index expiring in June declined 1 percent to 2,039.4. While exchanges are closed for the Good Friday holiday, futures contracts traded until 9:15 a.m., giving investors a window to react.
“The trend data is all moving in the right direction,” Labor Secretary Thomas Perez said in a telephone interview. “The labor market, overall, certainly has the wind at its back.”
Payrolls in February were revised down to 264,000. The median forecast in the Bloomberg survey of 98 economists called for a 245,000 March advance, with estimates ranging from 179,000 to 300,000 after a previously reported 295,000 advance. Revisions to prior reports subtracted a total of 69,000 jobs from overall payrolls in the previous two months.
Goods producers, including factories, construction firms and those that support oil and gas well drilling, cut jobs last month. Manufacturing payrolls dropped for the first time since July 2013 and the employment gain in the restaurant industry was the weakest since June 2012.
Payrolls in mining and logging, which include oilfield services, declined by 11,000 after a similar drop in February. Over the past three months, employment has fallen by 29,000 in those fields, the worst since a similar period ended in July 2009. Crude prices have slumped 54 percent since a June 2014 high.
The average workweek for all employees fell by six minutes to 34.5 hours. Inclement winter weather may have played a role in reducing hours. The agency said 182,000 people were unable to work because of weather, 41,000 more than the average for March. Another 531,000 people who usually work full-time could only find part-time work, up from an average 450,000 for the month.
The participation rate, which indicates the share of the working-age people in the labor force, decreased to 62.7 percent, matching the lowest since 1978.
Lesma Weir, 41, is among those struggling to find work. She moved to Dallas last year to start a new job as an accountant. Just as she moved, the prospective employer decided to cut staff and her position disappeared.
‘Give Me a Job’
“I can’t see the recovery,” said Weir, who has a master’s degree in business administration, $60,000 in student loans and a 17-year-old son with special needs. “We were told: ‘You need to get your education.’ I did that. I sacrificed. And now I’m just begging the world: ‘Just give me a job.’”
The March employment report follows a spate of data showing the economy has been cooling. Consumer spending barely rose in February after declining a month earlier, hampered in part by inclement winter weather in parts of the country.
Manufacturing expanded in March at the slowest pace in almost two years, restrained by a stronger dollar, weaker foreign demand, a plunge in oil prices and lingering delays in shipments from West Coast ports.
The slump in oil prices is weighing on producers and companies that build equipment and supply materials to the industry. U.S. Steel Corp. in late March notified 2,080 workers at an Illinois factory about potential dismissals. The country’s second-biggest producer of steel cited adverse market conditions including cheap imports and lower oil prices.
The economy probably expanded at a 1.5 percent annualized pace in the first quarter, according to the median estimate in a Bloomberg survey of economists. That’s down from a 2.2 percent rate in the last three months of 2014.
Figures on car purchases in March indicate consumer spending may be set to pick up. Motor vehicle sales rose in March to a 17.1 million annualized rate, matching the strongest pace since August, based on figures from Ward’s Automotive Group.
“We expect a firming labor market and still-low fuel prices and interest rates to support renewed momentum in economic activity as spring takes hold,” Emily Kolinski Morris, chief economist at Ford Motor Co., said on an April 1 sales call.
SolarCity Corp., the biggest U.S. rooftop solar installer, said in March that it plans to hire at least 300 people to expand its sales force in Roseville, California.
Further hiring would help alleviate slack in the labor market and allow wages to pick up. The outlook is improving for earners at the lowest end of the income scale. McDonald’s Corp. this week was the latest to announce plans to boost worker pay above the minimum wage. Wal-Mart Stores Inc., the largest U.S. discount chain, and Target Corp. are also making similar moves.