US adds 160,000 jobs as brisk hiring slows

WASHINGTON — The United States economy added the fewest number of jobs in seven months last month, and Americans dropped out of the labour force in droves, raising doubts on whether the Federal Reserve will raise interest rates before year’s end.

Non-farm payrolls increased by 160,000 jobs last month as the retail sector shed jobs and construction employment barely rose, said the US Labor Department yesterday. That was the smallest gain since September and below the first-quarter monthly average job growth of 200,000. The latest revisions also showed employers in the US added 19,000 fewer jobs in February and March than previously reported.

The unemployment rate held unchanged at 5 per cent but that was because more people dropped out of the labour force. Economists polled by Reuters had forecast non-farm payrolls rising 202,000 last month and the jobless rate to remain at 5 per cent.

“The labour market has been a shining beacon compared with other elements of the US economy for the past few months, but no longer. Today’s figure has come in disappointingly low,” said Mr Dennis de Jong, managing director of London-based brokerage UFX.com.

Stock markets slid and the US dollar fell after the payrolls data came in well short of forecast, adding to concerns over the pace of economic growth that have weakened investors’ appetite for risk globally. About five minutes after the opening bell in New York, the Dow Jones Industrial Average was down 0.3 per cent, while key European bourses were 0.4 to 1.2 per cent lower. The US dollar (S$1.36) fell 0.3 per cent to US$1.1437 per euro and 0.6 per cent to ¥106.62.

The steep slowdown in job gains is raising concerns that the weakness in overall economic activity has been spilling over to the labour market after growth slowed sharply in the first quarter this year. Average hourly earnings were a bright spot in the employment report, rising eight cents or 0.3 per cent last month. That took the year-on-year increase to 2.5 per cent from 2.3 per cent in March, but was still below the 3 per cent advance that economists say is needed for inflation to rise to the Fed’s 2 per cent target.

The Fed last raised its benchmark overnight interest rate target in December, the first time in nearly a decade it had done so, with policymakers having forecast two more rate hikes for this year. Federal funds futures have virtually priced out an interest rate increase at the central bank’s next meeting on June 14-15, according to CME Group data. The market-based measures also indicate a less than 50 per cent probability of rate hikes in September and November, with a 59 per cent chance by the December meeting.

Last month, the labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell 0.2 percentage point to 62.8 per cent. It had increased 0.6 percentage points since dipping to 62.4 per cent in September. The labour force shrank by 362,000 as people dropped out last month.

Last month, job growth fell in retail, construction and government, and remained weak in manufacturing. Retailers shed 3,100 jobs, down from an average gain of 52,500 in the first quarter of the year. Construction hiring slipped to 1,000 from an average of 24,000, and government shed 11,000 positions after adding an average of 16,000 in the first quarter. Meanwhile, job gains in higher-paid industries, such as management consulting, picked up from March. AGENCIES