* Non-farm payrolls increase 160,000 in April * Unemployment rate holds steady at 5pc * Average hourly earnings rise 0.3pc
WASHINGTON: The US economy added the fewest number of jobs in seven months in April and Americans dropped out of the labour force, signs of weakness that left some economists anticipating only one interest rate hike from the Federal Reserve this year.
Non-farm payrolls increased by 160,000 jobs last month as construction employment barely rose and the retail sector shed jobs for the first time since December 2014, the Labour Department said on Friday.
April’s job gains were the smallest since September and below the firstquarter average job growth of 200,000. Adding to the report’s soft tone, employers added 19,000 fewer jobs in February and March than previously reported.
The slowdown in hiring came against the backdrop of weak economic growth, subdued productivity and corporate profits. It prompted some financial institutions, including Bank of America Merrill Lynch and Barclays, to lower their interest rate hike expectations for this year to one from two before the report.
“We now only expect one rate hike in 2016, in September, as we believe it will take longer for policymakers to accumulate sufficient evidence that economic and labour market activity is rebounding after a soft start to the year,” said Michael Gapen, chief economist at Barclays in New York. The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade. Fed officials have forecast two more rate hikes for this year. Economists had expected the first of the two increases in June.
A Reuters survey of Wall Street banks that directly do business with the Fed showed nine out of 17 expected the US central bank to tighten monetary policy twice this year. This compared to 12 of 16 banks a month ago.
Market-based measures of Fed policy expectations have virtually priced out an interest rate increase at the Fed’s June 14-15 meeting, according to CME Group’s FedWatch. They see a 42 per cent probability of a rate increase in September and a 61 per cent chance at the December meeting.
New York Fed President William Dudley, however, told the New York Times on Friday that two rate hikes remained a “reasonable expectation.”
The dollar initially fell against a basket of currencies on the employment report, but retraced losses after Dudley’s comments. Prices for US government debt fell, while stocks on Wall Street reversed earlier losses to end higher.
Though the unemployment rate held at 5.0 per cent last month that was because people dropped out of the labour force. The stepdown in job gains could temper expectations of a strong rebound in economic activity in the second quarter after growth nearly stalled in the first three months of the year.
Economists had forecast rising 202,000 last month. payrolls