Payrolls increased more than forecast in February and the jobless rate unexpectedly fell to a five-year low of 7.7 percent, a sign U.S. employers were undaunted by the budget impasse in Washington.
Employment rose 236,000 last month after a revised 119,000 gain in January that was smaller than first estimated, Labor Department figures showed today in Washington. The median forecast of 90 economists surveyed by Bloomberg projected an advance of 165,000. The jobless rate dropped from 7.9 percent. Hiring in construction jumped by the most in almost six years.
Automakers and home-improvement retailers are among those announcing plans to take on more staff, which will lead to gains in incomes that may help the world’s biggest economy weather federal cutbacks and higher taxes. Today’s data may ratchet up debate among Federal Reserve policy makers, who are looking for “substantial” progress in the labor market to determine whether to maintain record stimulus.
“There’s a lot of dry tinder in the economy,” Robert Dye, chief economist at Comerica Inc. in Dallas, said before the report. “If companies are experiencing growth in orders, they’re going to be able to look past these broader fiscal concerns. We’re still going to need to see ongoing solid gains in employment and steady drops in unemployment before the Fed eases off the gas pedal.”
Stock-index futures maintained gains after the figures. The contract on the Standard & Poor’s 500 Index expiring in March rose 0.5 percent to 1,545 at 8:39 a.m. in New York. Treasuries declined, pushing up the yield on the benchmark 10-year note to 2.07 percent from 2 percent late yesterday.
Employers also boosted hours worked, and earnings picked up for American workers.
Payroll projections ranged from gains of 121,000 to 260,000 following an initially reported 157,000 increase in January, according to the Bloomberg survey.
Revisions to the prior two months’ reports subtracted a total of 15,000 jobs to the employment count in December and January.
Private payrolls, which don’t include jobs at government agencies, rose by 246,000 in February after a revised gain of 140,000 the previous month. Economists forecast they would grow 170,000 following an initially reported 166,000 gain in January.
The unemployment rate, derived from a separate survey of households, was forecast to hold at 7.9 percent, according to the Bloomberg survey median. The decline reflected both a gain in employment and an increase in people leaving the labor force.
The participation rate, which indicates the share of working-age people in the labor force, dropped to 63.5 percent, matching the lowest since September 1981, from 63.6 percent.
Today’s report showed factories added 14,000 workers in February, compared with a projected 9,000 advance and following a 12,000 increase in the previous month.
Auto manufacturing, reflecting car and truck sales running close to the best pace in five years, may lead to more factory hiring in coming months. Chrysler Group LLC, the automaker majority owned by Fiat SpA, will invest about $374 million and add 1,250 positions at Indiana factories to boost output of eight- and nine-speed transmissions. Chief Executive Officer Sergio Marchionne disclosed the investment in February.
Employment at private service-providers jumped 179,000 last month, today’s report showed. Construction companies added 48,000 workers, reflecting a 17,100 gain in payrolls at residential trade contractors. Retailers took on 23,700 employees.
A recovery in house prices and a need to increase the supply of homes for sale has stirred construction activity and benefited home-improvement retailers.
Home Depot Inc. said last month it plans to add more than 80,000 temporary employees ahead of its busiest season, about 14 percent more than a year ago, as the rebound spurs spending on remodeling and landscaping. Lowe’s Cos. said in January it would take on 45,000 seasonal workers, 13 percent more than a year earlier, and add 9,000 permanent employees.
Government payrolls decreased by 10,000 last month. Payrolls at government agencies and the companies they contract will be further tested in 2013. At the start of the month, Congress let $85 billion in across-the-board budget cuts, known as sequestration, proceed because it couldn’t compromise on deficit reduction.
The reductions in the rate of spending will trim growth by 0.5 percentage point this year and wipe out 350,000 jobs if they remain in place through December, according to the median forecast of 26 economists surveyed by Bloomberg on Feb. 25. Earlier this year, lawmakers also allowed the payroll tax funding Social Security benefits to revert to 6.2 percent from 4.2 percent, crimping household earnings.
Deloitte LLP is among companies looking past the cutbacks. The firm will boost its staff by 18,000 this year, Chief Executive Officer Joe Echevarria said during a Feb. 27 interview on “Bloomberg Surveillance.” The accounting firm is hiring to support long-term growth even with the political uncertainty from Washington, he said.
A steadily improving labor market has enhanced the job- finding prospects of college seniors, who are now searching for post-graduation employment. Most of those on track to graduate from the Georgia Institute of Technology in Atlanta have job offers two months before May, when they leave, said Jasmine Lawrence, 21, a computer science major who has been hired by Microsoft Corp., where she had an internship last summer.
“It is a great time for engineers right now,” said Lawrence, who said she had four offers, including one from Google Inc. and Gulfstream Aerospace Corp. “Lots of companies want to hire tech students.”
“The pay is fantastic,” Lawrence said, adding that she likes the career challenge of working with a team on the Xbox video-game consoles. “My friends will all at least be making $60,000 if not going to grad schools.” The outlook for graduates is “very optimistic.”
The nation’s central bank is not yet satisfied with the U.S. jobs recovery, and today’s figures showed that part of the drop in joblessness was tied to people leaving the labor force.
Fed officials have said they will keep their benchmark lending rate near zero as long as unemployment remains above 6.5 percent and inflation is projected to be no more than 2.5 percent. They also said during a January meeting they would keep buying $40 billion per month in mortgage bonds and $45 billion in Treasuries.
“Consistent with the moderate pace of economic growth, conditions in the labor market have been improving gradually,” Fed Chairman Ben S. Bernanke told lawmakers last week during his semiannual testimony on monetary policy. Central bank officials still want to see “substantial improvement in the outlook for the labor,” he said.