US employment gains seen accelerating in February

WASHINGTON: US employers likely stepped up hiring in February, in a sign of labour market strength that could further ease fears the economy is heading into recession and allow the Federal Reserve to gradually raise interest rates this year.

Nonfarm payrolls probably increased by 190,000 jobs last month in the US Labour Department’s report due on Friday, with the unemployment rate holding at an eight-year low of 4.9 per cent, according to a Reuters survey of economists.

The labour market gained 151,000 jobs in January, after the warmest temperatures in years boosted hiring in weather-sensitive sectors like construction, helping payrolls to rise by an average 279,000 jobs per month in the fourth quarter last year.

“The employment data should reinforce that the recession debate is premature and overdone, and could strengthen the case for the Fed not waiting too long,” said Ryan Sweet, senior economist at Moody’s Analytics in Westchester, Pennsylvania.

Fears of a recession in the wake of poor economic reports in December and slowing growth in China sparked a global stock market rout at the start of the year, causing financial market conditions to tighten.

Financial markets have priced out bets of an interest rate rise at the Fed’s March 15-16 policy meeting and the probabilities for rate increases for the rest of the year remain rather small.

Significant data such as consumer and business spending improved strongly in January though, leading to predictions that economic growth in the first quarter could rise by at least a 2.5 per cent at an annualized rate.

The economy grew at a 1.0 per cent pace in the fourth quarter of 2105.

Economists say the improved growth outlook, together with signs of inflation creeping up, could prompt the US central bank to lift borrowing costs in June.

The Fed raised its key overnight interest rate in December for the first time in nearly a decade.

There is a risk, however, that payroll gains could come in below expectations after a survey on Thursday showed employment in the services sector fell in February for the first time in two years.

Still, economists say any belowforecast number should not be interpreted as a sign of labour market weakness as companies are struggling to find qualified workers to fill open positions.

“Despite the weaker services survey, we still expect solid payroll gains in February. However, we should not be too surprised about a slowdown as the labour market approaches full employment,” said chief US economist at UniCredit Research in New York.

Fed Chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the working age population. The labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, is near four-decade lows. — Reuters