The U.S. job-creation engine sputtered in March as employers hired fewer workers than forecast and a shrinking labor force pushed the unemployment rate down to the lowest in four years.
Payrolls grew by 88,000, the smallest gain in nine months and less than the most-pessimistic forecast in a Bloomberg survey, after a revised 268,000 February increase, Labor Department data showed today in Washington. The jobless rate fell to 7.6 percent from 7.7 percent.
Stocks and bond yields tumbled as the report raised concern that federal budget cuts may be sapping growth in the world’s largest economy. The absence of sustained and bigger gains in employment and earnings underscores the Federal Reserve’s view that more progress is needed before record monetary policy stimulus can be scaled back.
“Most American companies are still lean and mean,” said Ethan Harris, co-head of global economics research at Bank of America Corp. in New York. “They’ve been very disciplined about controlling their workforce, their spending and investment. This is really a story about the fiscal austerity hitting an otherwise improving economy and delaying what should be an improvement in growth.”
The share of the working-age population in the labor force, known as the labor force participation rate, fell to 63.3 percent, the lowest since May 1979. The average number of hours worked for all employees increased in March, while earnings stagnated.
Stocks Decline
The Standard & Poor’s 500 Index declined 0.7 percent to 1,548.40 at 3:07 p.m. in New York. The yield on the benchmark 10-year Treasury note fell to 1.70 percent from 1.76 percent late yesterday.
The median of 87 estimates in a Bloomberg survey called for a 190,000 advance in payrolls. Revisions added a total of 61,000 jobs to the employment count in January and February.
The difference between today’s outcome for March and the average estimate of economists surveyed by Bloomberg was 3.5 times larger than the poll’s standard deviation, or the average divergence between what each economist forecast and the mean. The last time the report diverged as much was with the May 2012 employment report.
The dollar dropped 0.5 percent against the euro five minutes after the report was released.