Job Gains From Health to Film Show Resilience to U.S. Budget AxeRich Miller and Alex Kowalski
American industries from film-making and construction to accounting and health care powered broad-based job gains in February, a show of confidence among employers in the face of federal budget cuts and tax increases.
Private payrolls grew by 246,000 last month, the most since November, bringing the average gain over the past six months to more than 200,000, Labor Department data showed yesterday. The unemployment rate fell to 7.7 percent, a four-year low. The report also showed the scope of industries expanding employment was consistently higher over the past five months than at any time in almost two years.
“The breadth of the increase in jobs is very good,” said Robert Stein, a senior economist at First Trust Portfolios LP in Wheaton, Illinois, who forecast a 217,000 private payroll gain. “We have more jobs, we have more hours, wages are going up.”
The advances indicate the job market has the staying power needed to weather coming government spending cuts, called sequestration, of about $85 billion this year. The non-partisan Congressional Budget Office estimates that the automatic reductions could subtract 0.6 percentage point from gross domestic product in 2013, costing the economy 750,000 jobs.
“We can absorb a fair amount of the shock” from the expenditure reductions and tax increases, said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York.
He sees payroll growth temporarily slowing to an average 150,000 per month as the fiscal squeeze takes hold, before it picks up again later in the year. A drop in state and local government employment meant total payrolls rose 236,000 last month.
Stocks, the dollar and Treasury yields all rose yesterday after the report, which showed private employment growth exceeded the median forecast of 170,000 in a Bloomberg News survey of economists. The jobless rate fell from 7.9 percent.
The Standard & Poor’s 500 Index climbed 0.5 percent. Treasuries declined, pushing up the yield on the benchmark 10-year note to 2.04 percent from 2 percent late on March 7. The dollar extended gains versus the Japanese yen to the highest level since 2009.
The improvement in the labor market last month shows the Federal Reserve’s efforts to boost the economy “are beginning to have their intended effect,” Scott Anderson, chief economist at Bank of the West in San Francisco, said in an e-mail to clients.
Central bank 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 to spur further economic growth.
Federal Reserve Bank of St. Louis President James Bullard said this week that the central bank probably will press on with its asset purchases as contained inflation expectations give it time to continue the so-called quantitative easing.
“I think it’s going to be a while on the QE program,” Bullard, a voting member of the policy making Federal Open Market Committee this year, said in a “Bloomberg Surveillance” television interview yesterday. He spoke before the employment data were released.
Both the service and the production sides of the economy have gained momentum at the start of 2013. The Institute for Supply Management’s non-manufacturing index, tracking the largest part of the economy, unexpectedly climbed last month to the highest level in a year. The ISM’s factory gauge, which covers about 12 percent of the economy, has climbed for three consecutive months. In February, it reached the highest level in almost two years.
Employment at private service-providers jumped by 179,000 last month, yesterday’s Labor Department report showed. Professional and business service payrolls, which include law, accounting and architectural firms, rose 73,000, the most in a year.
Deloitte LLP is among companies looking beyond the government cutbacks. 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.
The 21,000 gain in employment at motion picture and sound recording studios last month was the biggest since record-keeping began for the category in 1990, according to the Labor Department figures.
Driven by a healing housing market, hiring in the construction industry jumped in February by the most in almost six years. Payrolls also climbed at retailers and health care providers.
Employment at goods-producers is humming along as well. Factories added 14,000 workers following a 12,000 increase in January. February’s was the biggest gain since July.
Strength among automakers, paced by car and truck sales running near the best rate in five years, may lead to additional manufacturing hiring in coming months. Chrysler Group LLC, 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.
Labor Department data show payrolls at motor vehicle and parts makers reached 788,100 in February, matching July as the highest level since November 2008.
A diffusion index measuring the breadth of industries expanding payrolls exceeded 60 in February for a fifth month, the longest such stretch in almost two years, according to Labor Department data. A reading greater than 50 shows more industries are hiring than cutting jobs.
Taken together, the broad-based labor market gains in the U.S. have enhanced job-finding 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, a computer science major who hired by Microsoft Corp., where she had an internship last summer.
“It is a great time for engineers right now,” said 21-year-old Lawrence, who had four offers, including one from Google Inc. and Gulfstream Aerospace Corp. “Lots of companies want to hire tech students.”