Major boost for US economy as hiring hits nine-month high
Published 05/03/2011 | 05:00
Hiring by US employers hit a nine-month high in February and the jobless rate slipped to a nearly two-year low of 8.9pc, showing the economy is kicking into a higher gear.
Employment increased by 192,000, the US Labour Department said yesterday, in line with expectations, in what was partly a bounceback from a weather-depressed January. Data for December and January was revised to show 58,000 more jobs created than previously estimated.
"We have moved into the expansion phase of the economic cycle and the economy is self-sustaining," said Brian Levitt, an economist at OppenheimerFunds in New York.
The unemployment rate fell to its lowest since April 2009, from 9pc in January.
Federal Reserve officials, who will meet on March 15, will likely welcome February's sturdy employment report, but probably still regard the pace of job creation as too slow to change the US central bank's ultra-easy monetary policies. The last time payrolls grew so much was last May, when the US government's hiring of temporary workers for a census boosted payrolls.
As in previous months, the private sector accounted for all the job gains in February, with an addition of 222,000 positions -- the largest gain since April 2010. That was up from 68,000 in January.
"The numbers confirm that labour market conditions are gradually improving," said Mohamed El-Erian, co-chief investment officer of PIMCO in Newport Beach, California.
Rising crude oil prices overshadowed the data, helping to push US stocks down. Prices for US government debt rose, while the dollar slipped against a basket of currencies.
The jobless rate has dropped 0.9 percentage point since November. The unemployment rate is being closely watched by the Fed and could well determine the timing of the US central bank's first interest rate hike. The Fed has held overnight lending rates near zero since December 2008.
Economists believe the Fed will want to see payroll gains in excess of 200,000 for at least six to nine months and a significant decline in unemployment before starting to withdraw its massive monetary support from the economy.
A surge in crude oil prices above $100 a barrel due to turmoil in the Middle East and North Africa represents a new
headwind for the economy.
But Fed chairman Ben Bernanke this week said higher oil prices were unlikely to steal much from growth or spark broader inflation, as long as they were not sustained.
With the jobless rate far from its natural 5-6pc level and inflation still short of the Fed's target of close to 2pc, analysts expect the Fed to complete its $600bn (€429bn) government bond-buying programme through June.
A separate report showed new orders received by US factories leaped 3.1pc in January, marking their biggest increase since September 2006 on a massive surge in aircraft orders.
Gold rose towards $1,425 (€1,018) an ounce yesterday as US February payrolls data supported expectations the Fed would hold off tightening monetary policy and as unrest in North Africa continued.