WASHINGTON: The US economy posted solid jobs growth in March but the unemployment rate ticked up, though for a good reason: more people entering the labour market.
The Labor Department reported on Friday (Apr 1) that 215,000 jobs were added in March, slightly easing from February's gain yet still suggesting that the labour market is holding up despite signs of weakening US growth and the global slowdown.
"The labour market continues to improve at a steady pace," said Sophia Koropeckyj of Moody's Analytics. "The average number of jobs created in the first quarter is exactly equal to the average for the past four years, a remarkable run."
There were other encouraging reports on Friday on the health of US economy at the end of the first quarter. Manufacturing activity grew in March after five months of contraction, according to the Institute for Supply Management's purchasing managers index.
The March jobs growth beat the 200,000 average analyst estimate. The gains in February and January were revised slightly lower, by a net 1,000 jobs.
The jobless rate edged up a tenth of a point to 5.0 per cent as more people entered the jobs market. The rate had held at 5.0 per cent from October through December, before dipping for the first two months of the year to 4.9 per cent, an eight-year low.
The participation rate in the labour force, which measures those having a job or seeking employment, rose for the fourth straight month to 63 per cent, its strongest level since March 2014.
That represents nearly 400,000 people who entered the jobs market and in part explains the slight uptick in the unemployment rate.
IHS chief economist Nariman Behravesh noted two longer-term, "particularly encouraging" trends: Jobs gains in the past two years have been the strongest since 1998-1999, and March marked the sixth consecutive month of large gains in the labour force.
"This is a vote of confidence on the part of workers regarding the health of the US economy," Behravesh said.
JOB GROWTH'S RECORD STREAK
The private sector added 195,000 jobs in March, the 73rd straight month of job growth. That was a record streak that added 14.4 million jobs after the economy exited the Great Recession in 2009.
Among the sectors where employment rose were retail trade, including restaurants and bars, health care and construction.
Government added 20,000 payrolls.
While mining and manufacturing remained weak spots, most of the labour market expanded. The average monthly jobs gain in the first quarter was a robust 209,000, easing from a 229,000 pace in 2015.
The improving labour market is a key reason for the Federal Reserve's historic interest rate increase in December, a quarter point lift in the federal funds rate pegged near zero for seven years to support the recovery.
Since then, the Fed has lowered its outlook for the future path of rate hikes, citing risks from the sputtering global economy.
Tepid US wage growth, of concern to Fed Chair Janet Yellen because it indicates slack in the jobs market, picked up slightly in March as the work week held steady. Average hourly wages rose 0.3 per cent and were up 2.3 per cent from a year ago.
Yellen earlier this week was more dovish about the prospects of higher interest rates, saying in a speech that the US central bank should "proceed cautiously" given troubles in the global economy.
Markets saw her remarks as taking a rate hike off the table at the Fed's April 26-27 policy meeting and probably at the June meeting as well.
Analysts were divided over whether the March jobs report had changed that timetable.
"Another good month of hiring in the US will encourage further chatter in some corners of the Fed moving closer to hiking interest rates again," said Chris Williamson of Markit.
"But signs of weakening economic growth mean policymakers are likely to be cautious and hold off until the global economy is showing greater vigor and the US economy more sparkle."
Others, like Jim O'Sullivan, chief US economist at High Frequency Economics, said the chances of a June hike were now higher.
"We believe the data help the case for the Fed to be tightening again before too long - we expect in June," he said.