|
|
|
|
Extra
March job growth is strongest in 4 years
'This is the report we've been waiting for,' one economist says. Stocks soar. Bonds plummet because an interest-rate increase looks more likely now.
By Tim Ahmann, Reuters
U.S. employment rose last month at the fastest pace in nearly four years as hiring increased across a wide array of industries, the government said on Friday in a report that stunned financial markets.
The report offers comfort to President Bush as the jobs market -- a hot political issue in the U.S. presidential campaign -- finally made a decisive break out of a long slump. Nevertheless, U.S. jobs lost since Bush took office still number a hefty 1.8 million.
Non-farm payrolls climbed 308,000 in March, helped a bit by the return of workers after a labor dispute at California grocery stores ended, the Labor Department said. This was the biggest gain since April 2000 and well above the 103,000 rise expected on Wall Street.
The unemployment rate ticked up to 5.7% from the two-year low of 5.6% seen in January and February.
"Wow! We finally got our job growth, and it came all at once,'' said an excited Stephen Stanley, chief economist at RBS Greenwich Capital.
Stocks, dollar, bonds react; is Fed next?
Stocks and the dollar shot higher, while U.S. bond prices plunged as investors were caught flat-footed by the surprising labor-market strength.
The Dow Jones industrials average shot up more than 100 points in the minutes after the opening bell, then leveled off about 85 points higher at midday. The tech-oriented Nasdaq Composite was up more than 1.3%.
While stocks cruised higher, bonds sold off sharply, sending rates up. Short- and mid-maturity Treasury bonds saw a rise of about a quarter point in yields, the biggest one-day increase since 2001 -- and one that will pull home mortgage rates sharply higher.
But there was some controversy in bond futures trading. Just minutes before the numbers were released, the price of the 30-year bond dropped sharply to 108.25 from 113, CNBCs Rick Santelli reported.
You have to wonder who would sell contracts so deeply discounted so far ahead of the number, Santelli said. A lot of traders were hurt in a big way. The Labor Department said it has no evidence the number was leaked.
Economists said the report suggested the Federal Reserve could raise overnight interest rates from the current 1958 low of 1% sooner than had been expected.
"I've been saying August for the first Fed hike, but maybe now it could even be in June,'' said Stephen Stanley, chief economist at RBS Greenwich Capital.
While there are concerns about rising rates, the Fed will probably be a little more patient in hiking rates, especially in an election year, said Lakshman Achuthan, managing director of the Economic Cycle Research Institute.
In spite of improvements in March, there are still some pretty significant headwinds in the job market, especially in the manufacturing sector, he said. Those include high productivity and outsourcing of jobs to other countries.
Fed officials have made it clear that the lack of jobs was the biggest factor preventing them from lifting interest rates from current 46-year lows toward a more neutral level, which analysts think could be closer to 4%.
.
Related news and resources on MSN
Increases across the board
The department said the end to the California grocery store dispute, which had idled 72,000 workers, boosted March payrolls by 10,000 to 20,000. The effect was muted because many of the returning employees were displacing temporary hires.
January and February payrolls were revised upward a combined 87,000, contributing to the report's positive tone.
"All in all, this is a very strong report,'' said Kurt Karl, head of research at Swiss Re in New York. `"This is a number that everyone has been waiting for.''
"It bodes well for the economy going forward,'' he said.
The number indicates that the economy may be getting back to noticeable job growth of about 200,000 per month, Achuthan said.
Job gains were widespread across industries.
Construction payrolls shot up by 71,000, bouncing off a 21,000 decline in February that many economists had pinned on bad weather. Retailers added 47,000 workers, in part a reflection of the return of the idled grocery store employees.
While a long-hoped for rise in manufacturing employment did not appear, the department said factory payrolls were unchanged last month, finally breaking a string of 43 consecutive monthly declines.
|
|
|
|
