U.S. March Payrolls Rise 211,000; Unemployment Rate at 4.7%
April 7 (Bloomberg) -- American employers added 211,000 workers in March as companies flush with profits expanded, capping the best start for hiring of any year since 2000. The jobless rate dropped to 4.7 percent, matching a four-year low.
The gain in payrolls followed a 225,000 rise in February that was smaller than previously reported, the Labor Department said today in Washington. The jobless rate compares with 4.8 percent the previous month.
Caterpillar Inc. and United Airlines are among companies taking on workers as the economy keeps its momentum after a quarter that economists estimate was the strongest in 2 1/2 years. The report may reinforce expectations that the Federal Reserve will keep raising interest rates after 15 consecutive increases.
``The labor market is growing at a pretty good pace,'' Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts, said before the report. ``We're clearly seeing a rebound in the economy from the soft spot we experienced in the fourth quarter, and I think we'll see payroll growth similar to last year.''
Economists expected payrolls would rise by 190,000 following a previously reported increase of 243,000 in February, according to the median of 77 forecasts in a Bloomberg News survey. Estimates of the increase ranged from 150,000 to 300,000. Economists also projected the unemployment rate would hold at 4.8 percent.
The payrolls figure brings the number of jobs created last quarter to 590,000, the most since the fourth quarter of 2004 and the best first quarter since 2000.
Hourly Earnings
Workers' average hourly earnings rose 0.2 percent, or 3 cents, after a 0.4 percent increase the previous month. Economists expected a 0.3 percent increase. Average wages were up 3.4 percent from March 2005.
Employment in service-producing industries, which include retailers, banks and government agencies, rose 202,000 last month after rising 194,000 in February, the report showed.
Construction employment rose 7,000 after rising 37,000 in February. Manufacturing jobs fell 5,000 last month after falling 10,000 in February. The workweek held at 33.8 hours and the manufacturing workweek held at 41 hours. Overtime remained at 4.5 hours for a fourth month.
Economists expected hours overall would rise to 33.8 from 33.7 previously reported in February, according to the Bloomberg News survey.
Inflation Risk
Kansas City Fed President Thomas Hoenig said this week the economy is running close to full capacity, echoing the Fed's warning on March 28 that overstretched factories and workers may pose a risk of faster inflation.
``We will continue to have a strong economy this year,'' Hoenig said on April 4 in a speech in Kansas City, Missouri. ``Employment will strengthen as well.''
Employers will add between 1.5 million and 2 million jobs this year, Hoenig said. That compares with 2 million new jobs in 2005. Surveys in the last few weeks showed companies are holding on to more workers.
Job cuts announced by U.S. employers fell 25 percent in March from a year ago, according to Challenger, Gray & Christmas Inc., a Chicago-based placement firm. Caterpillar, the world's biggest maker of earthmoving equipment, increased its workforce by 23 percent since the end of 2003, according to spokesman Jim Dugan.
Robust Hiring
``Hiring continues to be robust this year,'' Dugan said in an interview on April 6 from the company's headquarters in Peoria, Illinois.
United Airlines, the world's second-largest carrier, expects to hire about 3,500 to 4,000 people as it expands this year, said Jean Medina, a spokeswoman for the Elk Grove, Illinois-based company, in an e-mail March 30. United is replacing workers who left during three years in bankruptcy.
Rockwell Collins Inc., a maker of airplane cockpit instruments, hired 400 new workers last quarter with about 40 percent of those being engineering or technical positions. Chief Financial officer Clayton Jones plans to add 5,000 new jobs by 2010. Employment at the Cedar Rapids, Iowa-based company rose 8.3 percent last year to 17,100.
The Fed has raised the overnight lending rate to 4.75 percent in 15 quarter-point steps. Rising wages suggest policy makers aren't through lifting rates yet, said Drew Matus, senior economist at Lehman Brothers Holdings Inc. in New York.
Productivity
Productivity of employees at all businesses other than farms fell for the first time in almost five years during the first quarter, and labor costs rose, according to a March 7 report from the Labor Department. The decline in productivity suggests companies are finding it more difficult to wring out efficiency gains from their existing workforces, pointing to more hiring incoming months, economists said.
Earnings for companies in the Standard & Poor's 500 Index rose by 15 percent on average in the fourth quarter. That marked the 14th straight quarter that profit at those companies rose more than 10 percent, matching a streak that ended in 1996.
The ports of Los Angeles and Long Beach, the two biggest U.S. container ports, will experience record volumes this year, according to industry officials.
The number of unionized longshoremen has increased 40 percent from January 2004 and the number of so-called casual workers, dockworkers who train to become skilled longshoremen and are hired based on need, has risen more than fivefold since 2004, said Joe Di Masa, vice president of Yusen Terminals Inc.
Economists say housing, a key driver of growth and a source of cash for consumers, is starting to cool. Hiring is needed to boost incomes that will help keep people spending and the expansion rolling as housing falters, analysts said.
Linchpin
``The labor market is the linchpin of our economic forecasts, because income growth is going to sustain the consumer,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut.
The U.S. economy probably grew at a 4.7 percent annual rate from January through March, the fastest pace since the third quarter of 2003, according to the median forecast in the survey of economists surveyed by Bloomberg last month.
Growth in consumer spending probably rebounded to an annual rate of 4.7 percent last quarter from a 0.9 percent pace in the final three months of 2005.
Still Trimming
Some companies are still trimming their workforces to increase efficiency and shore up profit.
Fort Worth, Texas-based AMR Corp.'s American Airlines, the world's largest carrier, told about 600 workers that it may eliminate some maintenance jobs in the U.S. as it finds ways to do the same work with fewer people.
``In smaller cities, continued improvement and efficiency gains could lead to layoffs,'' spokesman John Hotard said in an interview on April 5.
Among blacks, the unemployment rate held at 9.3 percent, today's report showed. The jobless rate for Hispanics fell to 5.4 percent from 5.5 percent and for whites fell to 4 percent from 4.1 percent.
For teenagers, unemployment rose to 15.7 percent last month from 15.4 percent. The jobless rate for women fell to 4.1 percent from 4.3 percent. The jobless rate for men fell to 4.1 percent from 4.2 percent.
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