The US economy shook off concerns of a global slowdown in March and added 215,000 jobs, surpassing expectations, the US Department of Labor announced on Friday.
Before Friday’s results, some economists had been worried about a “March jinx” and a new setback in the steady month on month growth of the US labour market. But collapsing oil prices and worries that a slowdown in China will impact global trade do not appear to have impacted hiring so far.
The unemployment rate rose slightly to 5%, driven up by a larger number of people looking for work. In January the unemployment rate dropped below 5% for the first time since 2008 and had remained there for the first two months of the year.
The news is likely to bolster the Federal Reserve’s case for further interest rate rises, although the Fed chair, Janet Yellen, said this week that the central bank is likely to slow the pace of rate hikes this year.
“The sustained robust pace of job creation and accelerating wage growth should in theory bolster the Fed’s commitment to normalising policy with at least two further rate hikes this year,” said Chris Williamson, chief economist at Markit.
Overall, economists had expected the US economy to grow by 205,000 jobs and the unemployment rate to remain unchanged at 4.9%. The US economy had created on average 209,000 jobs over January, February and March.
A slightly higher unemployment rate is not necessarily all bad news. Some economists would like to see the unemployment rate to go up slightly, if it signalled that Americans who had previously given up looking for jobs were now becoming more optimistic and attempting to re-enter the labor market.
“While the unemployment rate has been holding steady, a slight rise in coming months could actually be a positive move – if driven by rising labor force participation, which would mean that potential workers see hope for themselves in the labor market and have started to look for jobs,” explained Elise Gould, senior economist at the left-leaning Economic Policy Institute.
In March, labor force participation inched up to 63%, up 0.6% since September of last year. According to Gould, that slight increase is “an indication that workers are feeling optimistic and are beginning to come off the bench and take some practice swings”.
“At 63%, the participation rate was the highest since March 2014,” said Williamson, of Markit.
Earlier this week, while speaking at the Economics Club of New York, Yellen said that she believed the labor market is not performing as well as it seems. She pointed out that the labor participation rate, the percentage of people working or actively looking for work, has remained near historic lows at 62.9%, and the 6 million Americans who want to work full time but have only been able to find part-time work. The number of such workers went up by 135,000 in March.
Another disappointing piece of news in the Friday’s job report were US hourly wages, which have risen by just 2.3% in the past 12 months.
“Another good month of hiring in the US will encourage further chatter in some corners of the Fed moving closer to hiking interest rates again, but signs of weakening economic growth mean policymakers are likely to be cautious and hold off until the global economy is showing greater vigour and the US economy more sparkle,” said Williamson.
While Yellen urged caution in her speech and hinted at “gradual increases” in interest rates later this year, other members of the Federal Reserve have hinted that another interest rate hike is not far off. In December, the Federal Reserve raised interest rates from near zero for the first time since June 2006. At the time, the Fed was expected to raise interest rates four times this year. Economists now expect only two interest rate hikes in 2016.