US employers added a greater-than-expected 236,000 workers to their payrolls in February and the jobless rate fell to a four-year low, offering a bright signal on the economy's health. The data from the Labour Department on Friday showed the economy gaining traction despite the blow from higher taxes and deep government spending cuts.
--- Non-farm payrolls jump 236,000 in February
--- Unemployment rate falls to 7.7pc from 7.9pc
--- Average hourly earnings rise four cents, workweek up
"This was a strong number and one of those rare cases where we were firing on all cylinders," said Jacob Oubina, a senior US economist at RBC Capital Markets in New York. The jobless rate fell to 7.7 percent, the lowest since December 2008, from 7.9 percent in January. The drop reflected both gains in employment and people leaving the labour force.
The upbeat report, which showed broad-based job gains, was another sign of the economy's fundamental health, and it added fuel to a rally in US stock markets that had already propelled the Dow Jones industrial average to record highs. At the same time, the dollar strengthened and the yield on the benchmark 10-year US Treasury note rose sharply.
While payrolls growth beat economists' expectations for 160,000 jobs, it was not seen as a game changer for the Federal Reserve in its efforts to foster even faster economic growth by buying bonds, a policy known as quantitative easing. "It's a first step down a long road before the Fed is convinced we are really we are seeing a substantial improvement in the labour market conditions," said Michael Hanson, a senior economist at Bank of America Merrill Lynch in New York.
Fed officials are likely to remain leery of withdrawing their support for the economy too soon in the face of tightening fiscal policy. The central bank is buying $85 billion in bonds per month and has said it would keep up asset purchases until it sees a substantial improvement in the labour market outlook. Although December and January's employment data was revised to show 15,000 fewer jobs added than previously reported, details of the report were solid, with construction adding the most jobs since March 2007 and hours for all workers increasing.
Job gains averaged 195,000 per month in the three months through January. Economists say roughly 250,000 jobs per month are needed on a sustained basis to significantly reduce unemployment. The level of employment is still 3 million jobs from the peak reached in January 2008. Since the 2007-09 recession ended, the economy has struggled to grow above a 2 percent annual pace. In the fourth quarter, output barely expanded.
Highlighting the need for faster employment growth, the share of the work age population with a job was unchanged at a historically low 58.6 percent for a third straight month. Economists also worry the tightening of fiscal policy could slam the brake on job growth in the months ahead. A 2 percent payroll tax cut ended and tax rates went up for wealthy Americans on January 1, and $85 billion in federal budget cuts known as the "sequester" started taking effect on March 1.
"The impacts of the tax increases will be starting to take effect soon while sequestration's harm will be showing up as we move through the spring and especially into the summer," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. In February, construction employment increased by 48,000 jobs after rising by 25,000 in January. The housing market has turned around decisively and employment is also being support by rebuilding on the East Coast after the destruction by Superstorm Sandy in late October.
Manufacturers also stepped up hiring. Factory jobs increased 14,000 last month after rising 12,000 in January. Retail employment increased by 23,700 jobs, an eighth straight monthly gain that defied a recent slowdown in sales. Healthcare and social assistance saw another month of solid job gains. The same was the case for leisure and hospitality. Government continued to shed jobs. Public payrolls dropped 10,000 last month after falling 21,000 in January. The sustained steady job gains are lending some stability to wages. Average hourly earnings rose four cents last month.