US job creation stalled unexpectedly in March, as inclement weather and weak corporate earnings resulted in the weakest pace of hiring since December 2013.
Nonfarm payrolls increased by just 126,000 in March, the Department of Labor reported on Friday. That was nearly half the rate forecast by economists, which called for 245,000. The number of jobs created in February was revised down to 201,000 from 295,000.
March was the first time in 14 months employers added fewer than 200,000 nonfarm payrolls, official data showed. Employers added an average of 269,000 payrolls per month over the past year, culminating in the strongest labour market recovery in well over a decade.
The report was more pessimistic than the one issued by payrolls processor ADP on Wednesday. ADP said private payrolls rose by 189,000 in March. That was the first time since January 2014 that job creation was fewer than 200,000, according to the ADP tally.
The unemployment rate held steady at 5.5% in March, a more than six-and-a-half year low. Workforce participation—the percentage of Americans working or actively searching for work—fell to 62.7% from 62.8%, official data showed.
The reports comes ahead of the highly anticipated earnings season. Wall Street is forecasting a disappointing first quarter. According to FactSet, one-third of the companies listed on the S&P 500 will post a drop in earnings in the first quarter, highlighting the slowdown in the economy.
A slowdown in consumer spending may have also weighed on hiring activity in March. Consumers appear to be using their fuel savings to pay down debt and increase their personal savings, which has resulted in a sharp decline in retail spending.
Average hourly earnings increased by 0.3% in March, the Labor Department also reported today. That was slightly higher than the consensus estimate of 0.3% but well below the level required by the Federal Reserve to begin normalizing monetary policy. Compared to March 2014, average hourly earnings were up 2.1%.
The slowdown in hiring will probably reinforce the Fed’s cautious approach to raising interest rates. While a rate hike is expected this year, policymakers will probably wait until September or later to begin adjusting the federal funds rate. Interest rates are forecast to increase only once or twice this year, according to the Fed’s “dot plot” chart of interest rate forecasts.