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US job report stirs economic recovery hopes

Number of people out of work falls further, with unemployment rate recording the lowest it has been in four years.
Last Modified: 09 Mar 2013 03:51
Unemployment rate fell to 7.7 percent in February as more people found work and others gave up the hunt [Reuters]

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.

The data from the Labour Department on Friday showed the US economy gaining momentum.

The unemployment rate fell to 7.7 percent, the lowest since December 2008 as more people found work and others gave up the hunt.

US companies are finding it cheaper to 're-shore' than hire foreign labour

Economists welcomed the report, but worried that government budget tightening in Washington could slow the recovery's momentum.

The dollar got a strong boost after the release of the Labour Department figures.

Analysts said the underpinnings of the data - showing more labour-market dropouts and still-high long-term jobless numbers - suggested the data was not enough to prod the Federal Reserve to tighten monetary policy.

A 2.0 percent payroll tax cut ended and tax rates went up for wealthy Americans on January 1, and $85bn in federal budget cuts started taking effect on March 1.

Rally in stocks

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 pushed the Dow Jones industrial average to record highs.

The Dow scaled another closing high and the Standard & Poor's 500 index rose for a sixth straight day on Friday.

The US dollar raced to a 3-1/2 year high against the yen  and touched a three month peak against the euro.

The yield on the benchmark 10-year US Treasury note  hit an 11-month high around 2.08 percent.

While payrolls growth beat economists' expectations for  160,000 jobs, it was not seen as a game changer for the Federal Reserve, which has pumped more than $2.5tn into the economy to foster faster growth.

The central bank is buying $85bn in bonds per month and has said it would keep up its asset purchases until it sees a substantial improvement in the labour-market outlook.

It is likely to remain leery of withdrawing its support too soon given the tightening of fiscal policy.

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.

Below the peak

The pace of hiring in February 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 three million jobs below the peak reached in January 2008.

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, a reminder of the immense slack that remains in the labour market.

In addition, the report showed that in February the jobless experienced longer periods of unemployment.

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 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 the leisure and hospitality industries.

Government continued to shed jobs. Public payrolls dropped 10,000 last month after falling 21,000 in January.

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