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March Jobs Report Shows Slowest Growth Since End of 2013

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Employers in March added the fewest workers since December 2013 and the jobless rate held at 5.5% as companies sought to bring U.S. headcounts in line with an economy that throttled back at the start of the year.

The 126,000 increase was weaker than the most pessimistic forecast in a Bloomberg survey and followed a 264,000 gain a month earlier that was smaller than initially reported, the Labor Department in Washington said. The median forecast in a Bloomberg survey of economists called for a 245,000 advance. Average hourly earnings rose 2.1% from a year earlier.

Companies tempered the pace of the hiring as rough winter weather, tepid overseas markets and a slowdown in energy-related capital investment combined to sting the economy. Even with the moderation in March payrolls, persistent employment opportunities are keeping Americans upbeat and laying the ground for a rebound in spending.

“November to February payrolls were white-hot numbers so we may see a much more realistic and sustainable pace,” Guy Berger, U.S. economist at RBS Securities Inc. in Stamford, Connecticut, said before the report. “While more is better, we’re not going to be cranking out very high numbers all the time.”

The smaller advance in employment broke a year-long string of monthly gains exceeding 200,000, which was the longest such stretch since 1995.

Payroll estimates of 98 economists in the Bloomberg survey ranged from gains of 179,000 to 300,000 after a previously reported 295,000 advance. Revisions to prior reports subtracted a total of 69,000 jobs to overall payrolls in the previous two months.

Broad-Based Slowdown

The slowdown in employment was broad-based. Goods producers, including factories, construction firms and the industries that support oil and gas well drilling, reduced jobs last month. Manufacturing payrolls dropped for the first time since July 2013 and employment in the leisure and hospitality industries was the weakest since September that same year.

The unemployment rate, which is derived from a separate Labor Department survey of households, matched the Bloomberg survey median. The participation rate, which indicates the share of the working-age people in the labor force, decreased to 62.7%, matching the lowest since 1978.

Average hourly earnings rose by 0.3% from the prior month, to $24.86. The gain from a year earlier was in line with the average since the expansion began in June 2009. The average work week for all workers fell by six minutes to 34.5 hours. The March employment report follows a spate of data showing the economy has been cooling. Consumer spending barely rose in February after declining a month earlier, hampered in part by inclement winter weather in parts of the country.

March Manufacturing

Manufacturing expanded in March at the slowest pace in almost two years, restrained by a stronger dollar, weaker foreign demand, a plunge in oil prices and lingering delays in shipments from West Coast ports.

The plunge in oil prices is weighing on producers and companies that build equipment and supply materials to the industry. U.S. Steel Corp. in late March notified 2,080 workers at an Illinois factory about potential dismissals. The country’s second-biggest producer of steel cited adverse market conditions including cheap imports and lower oil prices.

The economy probably expanded at a 1.5% annualized pace in the first quarter, according to the median estimate in a Bloomberg survey of economists. That’s down from a 2.2% rate in the last three months of 2014.

Auto Sales

Figures on car purchases in March indicate consumer spending may be set to pick up. Motor vehicle sales rose in March to a 17.1 million annualized rate, matching the strongest pace since August, based on figures from Ward’s Automotive Group.

“We expect a firming labor market and still-low fuel prices and interest rates to support renewed momentum in economic activity as spring takes hold,” Emily Kolinski Morris, chief economist at Ford Motor Co., said on an April 1 sales call.

Some businesses are expanding. SolarCity Corp., the biggest U.S. rooftop solar installer, said in March that it plans to hire at least 300 people to expand its sales force. The new employees will work at an office in Roseville, California.

Further hiring would help alleviate slack in the labor market and allow wages to pick up. The outlook is improving for earners at the lowest end of the income scale. McDonald’s Corp. this week was the latest to announce plans to boost worker pay above the minimum wage. Wal-Mart Stores Inc., the largest U.S. discount chain, and Target Corp. are also making similar moves.

Fed’s Yellen

Fed Chair Janet Yellen said at a March conference that she expects the central bank to raise interest rates this year, and that subsequent increases will be gradual without following a predictable path.

The job market is “likely to improve further in coming months,” she said. At the same time, progress on meeting the Fed’s inflation goal has been “notably absent.” Some of the weakness in inflation “likely reflects continuing slack” in labor markets.

–With assistance from Kristy Scheuble in Washington.

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