US employers added a greater-than-expected 236,000 workers to their payrolls last month and the jobless rate fell to a four-year low, offering a bright signal on the economy’s health.
The data from the US Labor Department on Friday showed the economy gaining traction. The unemployment rate fell to 7.7 percent, the lowest since December 2008, as more people found work and others gave up the hunt.
Economists welcomed the report, but worried that government budget tightening in Washington could slow the recovery’s momentum.
“We had already moved from a slog to a jog and we are on course to really get rolling. The risk here is, while the economy is gathering speed, the politicians are stepping on the brakes,” said Bill Cheney, chief economist at John Hancock Financial Services in Boston.
The employment report, which showed broad-based job gains, was just the latest sign of the economy’s fundamental health, and it added fuel to a rally in US stocks that had already propelled the Dow Jones industrial average to record highs.
While payrolls growth beat economists’ expectations for 160,000 jobs, it was not seen as a game changer for the US Federal Reserve, which has pumped more than US$2.5 trillion into the economy to foster faster growth.
“It’s a first step down a long road before the Fed is convinced we are really we are seeing a substantial improvement in labor market conditions,” said Michael Hanson, a senior economist at Bank of America Merrill Lynch in New York. “They will want to see 200,000 job growth, not just in one month, but several months in a row. The unemployment rate is still too high.”
The central bank is buying US$85 billion in bonds per month and has said it will keep up its asset purchases until it sees a substantial improvement in the labor market outlook.
It is likely to remain leery of withdrawing its support too soon given the tightening of fiscal policy.
A Reuters survey of the 17 large financial institutions that deal directly with the Fed found that they all expected it to continue bond purchases until at least late this year. Eleven expected the program to continue into next year.
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.
The pace of hiring last month marked an acceleration from the 195,000 per month average of the prior three months, and it approached the roughly 250,000 jobs per month economists say are on a sustained basis to significantly reduce unemployment.
Still, employment remains 3 million jobs below the peak reached in January 2008.
Last month, 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 US east coast after the destruction by Hurricane Sandy in late October last year.
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.