The unemployment rate dipped to 4.5 percent and workers got fatter paychecks in February, even as bad winter weather sent a bit of a chill through U.S. job growth.
The latest employment picture, released by the Labor Department on Friday, suggested employers are holding up well and opportunities continue for jobseekers as the economy deals with a sluggish spell, a housing slump and troubles in the automotive industry.
Employers — both private companies and the government — added a total of 97,000 new jobs to their payrolls in February, the fewest in two years. Lousy winter weather was blamed for much of the slower job growth.
Construction companies — already feeling the strain of the ailing housing market — slashed 62,000 jobs in February, the most in 16 years, as nasty weather hit many parts of the country.
Meanwhile, factories, coping with slowing economic conditions at home and intense competition from abroad, continued to cut jobs. They eliminated 14,000 positions last month.
Those job losses, however, were eclipsed by employment gains elsewhere including at health care facilities, financial companies, computer-design firms, bars and restaurants, retailers and the government.
“The job market remains relatively healthy. The weather certainly delivered a lashing to the job market in February, particularly in the construction business as snow, ice, and sleet hammered parts of the country,” said Lynn Reaser, chief economist at Bank of America’s Investment Strategies Group. “Still, companies cautiously have the hiring mats out and workers are making more money.”
In financial markets, the employment news gave a boost to the Dow Jones industrials. The index rose 15.62 points to close at 12,276.32, after trading in both positive and negative territory over the course of the day.
The drop in the unemployment rate from 4.6 percent in January came as people left the work force in February. Economists said bad weather made it difficult for people to get out and look for jobs. Taking those factors into account, February’s jobless rate, the lowest since December, still should ease any fears that the economy could be headed for a worse-than-anticipated slowdown in growth, analysts said.
On another encouraging note, the economy ended up adding 55,000 more jobs in December and January combined than the government estimated a month ago.
Workers’ wages grew briskly, another sign that the job market is in fundamentally good shape, analysts said.
Average hourly earnings jumped to $17.16 in February, from $16.49 a year earlier. That represented a solid 4.1 percent increase over the last 12 months.
“Because unemployment is low, workers have more negotiating power and are getting higher wages,” said Mark Zandi, chief economist at Moody’s Economy.com. “Increasing it is becoming a worker’s market, particularly for highly skilled and educated workers.”
Strong wage growth is good for workers and supports consumer spending, a key ingredient to the country’s economic health. But a rapid pickup — if sustained and not blunted by other economic forces — can raise fears about inflation. Spiraling inflation would whittle away any wage gains, hurting workers’ wallets. It isn’t good for the overall economy, either.
The Federal Reserve, which had steadily boosted interest rates for two years to fend off inflation, has left rates alone since August. Economists predicted the Fed — while keeping a close eye on inflation — will continue to hold rates steady when it meets next on March 20-21.
In other economic news, the Commerce Department reported that the trade deficit narrowed to $59.1 billion in January as U.S. exports climbed to an all-time high.
The latest batch of economic reports come as President Bush continues to get lukewarm ratings for his economic stewardship. Just 41 percent of the public approves of the president’s handling of the economy, compared with 57 percent who disapprove, according to an AP-Ipsos poll.
Democrats, who accuse Bush of not doing enough to close the gap on economic inequality, say a top priority is getting final agreement in Congress on legislation to boost the federal minimum wage from $5.15 an hour to $7.25 an hour. The wage hasn’t budged for nearly 10 years. Democrats also are pushing legislation making it easier for workers to start unions against company wishes.
In the employment report, 39,000 of the total 97,000 jobs gains in February came from federal, state and local governments. That meant private companies added just 58,000 jobs last month, the fewest since November 2004. Some analysts found that a bit worrisome.
“There are clear warning signs of deterioration ahead,” said Ian Shepherdson, chief economist at High Frequency Economics.
Analysts predict the unemployment rate will creep up this year as economic growth slows. Some predict the jobless rate could climb to close to 5 percent by the end of the year.