By Don Lee
April 4, 2015

The sharp retreat in hiring last month to the slowest pace in more than a year reflects lost economic momentum in the U.S. — and may make the Federal Reserve more reluctant to start raising interest rates as early as June.

The Labor Department report Friday showing just 126,000 new jobs were added in March surprised analysts, who were expecting almost twice that number.

But neither did it raise alarm bells. Economists figured that cold weather and heavy snows exaggerated the decline and that hiring was bound to ease after unsustainable, heady job growth in some recent months.

The unemployment rate held steady at 5.5% and, in a sign that the job market is getting tighter, workers’ average wages rose at a faster pace last month.
The recent healthy job growth, better household balance sheets and elevated confidence should be just the formula consumers need to continue to spend. – Jack Kleinhenz, chief economist at the National Retail Federation

“Payrolls are always volatile even at the best of times, and we are coming off a run of almost unbelievably strong employment growth stretching back to last summer,” Paul Ashworth, an economist at Capital Economics, said in a note to clients.

Other labor market indicators, including jobless claims and new openings, are looking good, he said, so “this is most probably another temporary blip.”

Other analysts, however, said it was hard to dismiss the latest report because it was bad on many fronts.

Manufacturing jobs contracted for the first time in 20 months, weighed down by a strong dollar that has hampered exports. Mining employment dropped again, the result of plunging oil-drilling activity. The labor force shrank. Workers put in fewer hours on the job in March.

Moreover, Labor Department officials revised down job growth in January and February by a combined 69,000 positions. That’s a large enough number that, taken together with the weak March hiring, paints a different picture of the labor market than before Friday’s news, Georgetown University economist Harry Holzer said.

With those revisions, job growth in the first quarter averaged a little less than 200,000 a month, down from 324,000 in the fourth quarter and 260,000 for all of last year.

Though a little concerned about the downward trend, Holzer noted that the revised numbers are more consistent with the underlying performance of the U.S. economy.

Economic output most likely slipped to a sluggish 1% annual rate in the first quarter, partly because of the weather. Most experts see growth picking back up in the spring and ending the year up a moderate 2.5%, similar to 2014.

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