US employers stepped up hiring in February, pushing the unemployment rate to a four-year low, suggesting the economy is gaining traction despite the blow from higher taxes and deepgovernment spending cuts.
Non-farm payrolls surged 236,000 jobs last month, the Labour Department said yesterday, handily beating economists’ expectations for a gain of 160,000.
The jobless rate fell to 7.7 per cent, the lowest since December 2008, from 7.9 per cent in January. The decline reflected gains in employment as well as people leaving the labour force.
The upbeat report was another sign of the economy’s fundamental health, which has already propelled the Dow Jones industrial average to record highs.
“This was a strong number and one of those rare cases where we were firing on all cylinders,” said Jacob Oubina, a senior US economist at RBC Capital Markets in New York.
US stock index futures and the dollar added to gains after the report, while interest rates on US government bonds rose.
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 increased hours for all workers.
Job gains in February were well above the 195,000 monthly average for the three months to January.
The solid report offered hope the economy would be able to absorb the fiscal austerity.
A two per cent payroll tax cut ended and tax rates went up for wealthy Americans on January 1. In addition, $85 billion in federal budget cuts that could slice as much as 0.6 percentage point from growth this year started on March 1. But the pace of gains is still below the roughly 250,000 jobs per month over a sustained period that economists say is needed to significantly reduce unemployment. The Federal Reserve will likely maintain its very accommodative monetary policy.
“We’re in a sweet spot of sorts with the data showing a more robust recovery, which supports stocks and the dollar, yet not quite strong enough to declare an end to quantitative easing,” said Omer Esiner, chief market analyst at the Commonwealth Foreign Exchange in Washington.
The US central bank is buying $85 billion in bonds per month and has said it would keep up asset purchases until it sees a substantial improvement in the labour market outlook, a message that Fed chairman Ben Bernanke drove home in congressional testimony last week.