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World
09 Apr 2017

US unemployment rate drops: Of hiring, firing and weather

US unemployment rate plummets to 10 year low

Unemployment rate in the US has reached the decade's lowest at 4.5% since May 2007.

Factors including overall slow job growth rate and layoffs from the retail sector are said to have brought this about. Dropping temperatures in March and the occurrence of storms in Northeast and mid-west are further said to have complemented this by negatively impacting hiring.

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In context

US unemployment rate plummets to 10 year low
What caused the low?

About

What caused the low?

According to Labour Department figures, non-farm payrolls increased by 98,000 jobs last month, has been the fewest since May. Further job gains exceeding 20,000 in January and February were dampened by a hiring slowdown in construction, leisure and hospitality space.

Economists attribute low hiring-rates to bad weather and unusually hot temperatures. However, an increase of 4,72,000 was recorded in a smaller survey on households.

Job demand in the US

About 75,000-100,000 jobs are required to be created within the economy. While 98,000 jobs were created last month it only added up to half the number in January and February and fell short of the expected number by 82,000 jobs.

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Highlights

Warning signs

The Labour Force Participation Rate, denoting the number of working Americans or those looking for work touched an 11-month high of 63%.

While construction jobs rose to 6000 reflecting a marginal gain since August, manufacturing jobs fell considerably to 11,000 from 26,000 in February.

Further, retail payrolls have dropped in the background of mass layoffs from major retail giants such as Macy's Inc.

What does this indicate?

Trends

What does this indicate?

Falling unemployment rate does not point to a weak labour market. Analysts are overall optimistic about the labour market staying strong. Luke Bartholomew, investment strategist at Aberdeen Asset Managements terms it a sign of a tight labour market.

Low unemployment rate and rising inflation might likely prompt the US Central Bank to set another interest rate by June and may facilitate tighter economic control.

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