Washington/New York: The pace of US jobs creation slowed sharply in March, reviving doubts about the health of the American economic recovery and delivering a blow to President Barack Obama's re-election campaign.
Employers generated 120,000 new positions last month, below economists' forecasts of 205,000 and the weakest rate of payroll formation since last October.
The US unemployment rate fell from 8.3 to 8.2 per cent, but that improvement was the result of a decline in the number of people in the labour force, as dispirited jobless workers abandoned their search for employment.
The signs of fading momentum took financial markets by surprise and were pounced on by Mr Obama's opponents ahead of November's presidential election. S&P futures fell 15.3 points to 1,374.90 in an abbreviated holiday session, following the worst weekly loss since mid-December during trading on Thursday.
The yield on 10-year Treasury notes dropped 12 basis points to 2.05 per cent while the dollar eased 0.2 per cent on a trade-weighted basis, with investors more confident that the Federal Reserve will extend its current bond buying efforts beyond June.
Mr Obama's campaign for a second term in the White House is relying on strong economic figures. Commenting on the data, he focused on the continued job creation, even if it was weaker than in previous months.
"It's clear to every American that there will still be ups and downs along the way, and that we've got a lot more work to do," Mr Obama said.
But Mitt Romney, the frontrunner for the Republican presidential nomination, said the numbers showed a "stagnant" employment market and highlighted the decline in the labour force.
"Millions of Americans are paying a high price for President Obama's economic policies, and more and more people are growing so discouraged that they are dropping out of the labour force altogether," Mr Romney said. "It is increasingly clear the Obama economy is not working and that after three years in office the president's excuses have run out."
Economists cautioned against reading too much into one month's job figures that departed so far from what had seemed a stable trend. One possibility is that the January and February payrolls were flattered by warm weather and so the change to March looked smaller.
The US Federal Reserve is unlikely to be swayed from its watch-and-wait attitude to the economy but the weak figure will reinforce its caution about the health of the recovery. In a recent speech, chairman Ben Bernanke warned that the pace of recent jobs creation might not be sustainable unless growth picked up.
"One number is not going to see the [Federal Reserve] make any knee-jerk reactions, but it will serve as a reminder to the hawks that the US is not fully up and running again," said David Semmens, senior US economist at Standard Chartered.
The monthly payrolls number has a sampling error of plus or minus 100,000 and is prone to later revisions. Last August, the initial payrolls estimate came in at zero, but after revisions that was increased to 85,000.
The jobs report helps to end what had been a confusing divergence between strong labour market data and weak numbers on output: it looks like the truth was somewhere in the middle with a steady but mediocre recovery.
The figures will reinforce forecasts that growth in 2012 will be closer to 2 per cent than 3 per cent. The further decline in labour force participation may lead analysts to cut their estimates of the year-end unemployment rate falling below 8 per cent.
The slowdown in payroll creation in March was concentrated in service industries, such as retailing, while manufacturing payrolls actually increased.
"The latest employment report will play to those who believe weather has played an important role in inflating the January and February reports, and will seriously challenge any thoughts that Fed can end unorthodox measures with an end to Operation Twist at the end of June," said Alan Ruskin, strategist at Deutsche Bank.
Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, said the data were the "most distressing" economic news in some time. "On balance, today's employment report turns back the clock about five months, and, from our perspective, brings into question the sustainability of job growth through the middle portion of 2012," he said.
The government's data followed another report from ADP, the payroll processor, on Wednesday that showed the private sector added 209,000 new workers last month. The government's official report showed less robust private-sector growth at 121,000 new positions following a gain of 233,000 in February.
Copyright The Financial Times Limited 2012
Posted on www.ft.com on April 6, 2012 8:30 pm
No comments:
Post a Comment