Payrolls Rise as U.S. Jobless Rate Reaches Four-Year Low
Job growth surged last month as automakers, builders and retailers pushed the unemployment rate to a four-year low, defying concerns that budget battles in Washington would harm the economic expansion.
Employment rose 236,000 last month after a revised 119,000 gain in January that was smaller than first estimated, Labor Department figures showed today in Washington. The median forecast of 90 economists surveyed by Bloomberg projected an advance of 165,000. The jobless rate dropped to 7.7 percent, the lowest since December 2008, from 7.9 percent.
“It really should cause people to rethink their weak first-half growth estimates,” said Drew Matus, deputy U.S. chief economist at UBS Securities LLC in Stamford, Connecticut, who correctly forecast the unemployment rate. “People counted out the U.S. consumer a little too easily on the payroll-tax increases.”
Stocks, the dollar and Treasury yields all rose on signs the world’s largest economy is gaining strength in the face of federal budget cuts and higher payroll taxes. The report may fuel debate among Federal Reserve policy makers considering how long to maintain record stimulus to boost growth and employment.
Matus said the report is likely to convince Fed policy makers “that they’re doing exactly the right thing by stimulating the economy.”
The Standard & Poor’s 500 Index rose 0.5 percent to 1,551.18 at the close in New York. Treasuries declined, pushing up the yield on the benchmark 10-year note to 2.04 percent from 2 percent late yesterday. The dollar extended gains versus the yen to the highest level since 2009.
Hiring in construction jumped by the most in almost six years. Payrolls also climbed at retailers and professional and business services such as temporary-help firms.
An improving labor market has enhanced the job prospects of college seniors, who are now searching for post-graduation employment. Most of those on track to graduate from the Georgia Institute of Technology in Atlanta have job offers two months before May, when they leave, said Jasmine Lawrence, 21, a computer science major who has been hired by Microsoft Corp., where she had an internship last summer.
“It is a great time for engineers right now,” said Lawrence, who said she had four offers, including one from Google Inc. and Gulfstream Aerospace Corp. “Lots of companies want to hire tech students.”
Private payrolls, which don’t include jobs at government agencies, rose by 246,000 in February after a revised gain of 140,000 the previous month. Economists forecast they would grow 170,000 following an initially reported 166,000 gain in January.
As the U.S. economy gains momentum, Europe’s is contending with a debt crisis that is weighing on company spending and investment. Germany industrial production unexpectedly stagnated in January, a report today showed.
In China, exports exceeded forecasts in February, an indication that improving global demand may help to sustain the rebound in the world’s second-biggest economy.
Projections for U.S. payrolls ranged from gains of 121,000 to 260,000 following an initially reported 157,000 increase in January, according to the Bloomberg survey. Revisions subtracted a total of 15,000 jobs to the employment count in December and January.
The unemployment rate, derived from a separate survey of households, was forecast to hold at 7.9 percent, according to the Bloomberg survey median. The decline reflected both a gain in employment and an increase in people leaving the labor force.
Bill Gross, manager of the world’s biggest bond fund, said the increase in employment won’t prompt the Fed to alter its stimulus measures.
“They are going to look at the participation rate, they are going to look at work rate, they are going to look at productivity -- those things in combination,” Gross, the founder of Pacific Investment Management Co., said in a radio interview on “Bloomberg Surveillance” with Tom Keene.
The decline in unemployment reflected both a gain in employment and an increase in people leaving the labor force. The participation rate, or the share of working-age people in the labor force, dropped to 63.5 percent, matching the lowest since September 1981, from 63.6 percent.
At the same time, higher wages will give American consumers more to spend as they contend with an increase in the payroll tax. Average hourly earnings rose 0.2 percent to $23.82 in February, today’s report showed. The average work week for all employees increased six minutes to 34.5 hours.
Consistent gains in the labor market have started to create opportunities for those out of work. An even stronger market could brighten the prospects for people like Tim Burkey.
The 57-year-old lost his job as an information technology network administrator at XLHost in Columbus, Ohio, in September after several projects he worked on came to a close. Last week, he was hired by Bob Evans Farms Inc. as a manager in training.
The move to restaurants could be the best move he’s made or the “biggest oops,” he said, and he doesn’t yet know if he’ll stay in the food industry or try to return to technology. “I do not know the answer to that yet. That is the million-dollar question for me,” he said.
Factories added 14,000 workers in February, compared with a projected 9,000 advance and following a 12,000 increase in the previous month.
Auto manufacturing, reflecting car and truck sales running close to the best pace in five years, may lead to more factory hiring in coming months. Chrysler Group LLC, the automaker majority owned by Fiat SpA, will invest about $374 million and add 1,250 positions at Indiana factories to boost output of eight- and nine-speed transmissions. Chief Executive Officer Sergio Marchionne disclosed the investment in February.
Construction companies added 48,000 workers last month, reflecting a 17,100 gain in payrolls at residential trade contractors. Employment at private service-providers jumped 179,000 and retailers took on 23,700 employees.
Government payrolls decreased by 10,000 last month. Payrolls at government agencies and the companies they contract will be further tested in 2013. At the start of the month, Congress let $85 billion in across-the-board budget cuts, known as sequestration, proceed because it couldn’t compromise on deficit reduction.
“Today’s numbers show that the recovery is gaining traction,” Alan Krueger, chairman of the White House Council of Economic Advisers, said on Bloomberg Television. At the same time, “the sequestration’s going to make some important cuts, which are going to hurt people, it’s going to hurt investment, and it’s going to slow economic growth and job creation.”
Deloitte LLP is among companies looking past government spending cuts. The firm will boost its staff by 18,000 this year, Chief Executive Officer Joe Echevarria said during a Feb. 27 interview on “Bloomberg Surveillance.” The accounting firm is hiring to support long-term growth even with the political uncertainty from Washington, he said.
A recovery in house prices and a need to increase the supply of homes for sale has stirred construction activity and benefited home-improvement retailers.
Home Depot Inc. (HD) said last month it plans to add more than 80,000 temporary employees ahead of its busiest season, about 14 percent more than a year ago, as the rebound spurs spending on remodeling and landscaping. Lowe’s Cos. said in January it would take on 45,000 seasonal workers, 13 percent more than a year earlier, and add 9,000 permanent employees.
Fed officials have said they will keep their benchmark lending rate near zero as long as unemployment remains above 6.5 percent and inflation is projected to be no more than 2.5 percent. They also said during a January meeting they would keep buying $40 billion per month in mortgage bonds and $45 billion in Treasuries.
“Consistent with the moderate pace of economic growth, conditions in the labor market have been improving gradually,” Fed Chairman Ben S. Bernanke told lawmakers last week during his semiannual testimony on monetary policy. Central bank officials still want to see “substantial improvement in the outlook for the labor,” he said.
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