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US adds fewer jobs than expected, unemployment rate plunges to 4.5%

Myles Udland
Markets Reporter

The U.S. economy added fewer jobs than expected in March while the unemployment rate plunged to a new post-crisis low.

In March, nonfarm payrolls grew by 98,000, well below the 180,000 that was expected by economists and down from February’s revised job gains of 219,000.

The unemployment rate, however, plunged to 4.5%, a new post-crisis low and the lowest since May 2007. Wages also rose in-line with expectations with wages rise 0.2% over last month and 2.7% over the prior year. The labor force participation rate, which has been rising in recent months, remained flat at 63%.

Also in March, the broader underemployment rate, which captures not only those out of work but those working part-time that would like full-time work, fell to 8.9% after hitting 9.2% in February, which marked a new post-crisis low.

Friday’s report also saw both the January and February jobs numbers revised down by a combined 38,000, and over the last three months job gains have now averaged 178,000.

Overall, this is a mixed — but still solid — report with wages rising as expected, the unemployment rate plunging, but overall job gains disappointing. For the Federal Reserve, this report isn’t likely to change their view of the health of the U.S. labor market.

Additionally, some economists had said that worse-than-average winter weather in March had potential to depress the headline payrolls number.

“The payroll number almost certainly was depressed by the snowstorm in the northeast during the survey week,” said Ian Shepherdson, an economist with Pantheon Macro. “For the Fed, the unemployment rate is the ultimate arbiter of the tightness of the labor market, and the prospect of the rate continuing to fall towards 4% will be very disconcerting.”

Friday’s report, however, will likely be overshadowed by late Thursday news that the U.S. had launched about 60 cruise missiles at a Syrian government air base. This comes after a chemical attack earlier in the week against civilians.

Shortly after the report, stock futures were lower with Dow futures down about 60 points, S&P 500 futures off 7, and Nasdaq futures down about 15. Overnight, Dow futures had dropped by as many as 130 points but ahead of the jobs report had moved back to little-changed.

Gold prices were higher in early trade on Friday, up about 1%, and oil prices were also higher, rising about 0.8%.

Following the report, Neil Dutta, an economist at Renaissance Macro said, “The payroll data is complete fake news. That’s all. Drop in the unemployment rate with strong [household] employment is what counts right now. Fed is going to hike in [the second quarter].”

In March, the household survey showed there were 472,000 jobs added to the economy in March.

Economists typically cite the establishment survey, which in March showed there 98,000 jobs added, because it is a less volatile number with a smaller margin of error. The household survey is more comprehensive — including self-employed workers and agricultural workers, among others — but tends to produce bigger swings month-to-month.

By industry, the biggest gains in March were from service-providing jobs, which rose by 61,000, while the construction and manufacturing sectors added just 6,000 and 11,000 jobs, respectively. A disappointing sector was retail, which lost almost 30,000 jobs in March and has now seen its worst two months since 2009.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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