US jobless rate falls to four-year low
US unemployment fell to a four-year low last month, offering a bright signal on the economy's health.
Data shows that American employers added a greater-than-expected 236,000 workers to their payrolls in February.
The data from the Labour Department yesterday showed the economy gaining traction despite the blow from higher taxes and deep government spending cuts.
The jobless rate fell to 7.7pc, the lowest since December 2008, from 7.9pc in January. The drop reflected both gains in employment and people leaving the workforce.
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.
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 seeing a substantial improvement in the labour market conditions," said Michael Hanson, a senior economist at Bank of America Merrill Lynch in New York.
"They will want to see 200,000 jobs growth, not just in one month, but several months in a row."
Fed officials are likely to remain cautious of withdrawing their support for the economy too soon in the face of tightening fiscal policy. The central bank is buying $85bn in bonds per month and has said it would keep up asset purchases until it sees a substantial improvement in the labour market outlook.
Economists also worry the tightening of fiscal policy could slam the brake on job growth in the months ahead.
A 2pc payroll tax cut ended and tax rates went up for wealthy Americans on January 1, and $85bn (€65bn) 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.
"While the economy appears to be gaining some momentum right now, the sand in the gears is Washington."
The sustained steady job gains are lending some stability to wages. Average hourly earnings rose four cents last month. That was the fourth straight monthly gain. (Reuters)