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Friday, 3 March, 2000, 14:45 GMT
US jobs growth slows
There is no jobs growth in manufacturing
There is no jobs growth in manufacturing
The US economy is no longer creating jobs at a cracking pace, easing fears that the US central bank, the Federal Reserve, will need to raise interest rates further.

There were 43,000 jobs added to the US economy in February, substantially below the 205,000 expected by analysts, and well below the 384,000 jobs created in January

Productivity growth means fewer jobs
Productivity growth means fewer jobs
As a result, unemployment rose slightly to 4.1%, up from 4.0% last month. That is still one of the lowest rates of unemployment since the 1960s.

US Labor Secretary Alexis Hermann said that although there was not yet a worker shortage, there was a growing skills shortage in the economy.

So far the tight labour market is not boosting wages. Average earnings climbed by only 0.3% in the month, or 3.6% year on year, to $13.53 per hour, a slower rate of increase than in the previous month.

But most economists argued that despite last month's slowdown, the US economy was still growing too fast.

"All the other data we have seen this week on demand - store sales, new truck sales and construction sales - suggest that (growth in) the first quarter will be in excess of 5%," said David Horner of Merrill Lynch.

Rate rises on hold?

The weak jobs numbers could make it more likely that the US central bank to hold off from further interest rate increases. The Fed has already raised rates four times to 5.75% in an attempt to cool the booming US economy, which grew by a torrid 6.8% in the last quarter of 1999.

The current data suggest that the long-awaited slowdown may be taking place, as the interest rate cuts begin to bite.

The biggest slowdown in jobs occurred in the interest-rate sensitive construction sector, which had added a large number of jobs in January to the mild weather.

But Mr Greenspan, the Fed chairman, appears to believe that it is necessary to take pre-emptive action now to slow the US economy, even if there is no sign of inflation or wage growth.

So he may still opt for a rate increase at the end of March, when the Fed next meets to consider interest rates.

"The trend is about what it has been. A lot of this is reversing a distortion. This kind of news makes the case for a gradual Fed tightening," commented James Glassman of Chase Securities.

Meanwhile, the US stock market celebrated the weaker-than-expected figures, with a relief rally that took the leading average, the Dow Jones Industrial Average, up 144 point to 10,308 in the first fifteen minutes of trading.

Mr Greenspan has often cited over-valued stock prices as another reason why the Fed needs to raise rates, arguing that people who have made paper profits on the stock market are spending more than the economy can afford.
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See also:

01 Mar 00 |  Business
US economy breaks record
08 Feb 00 |  Business
US productivity grows 5%
14 Jan 00 |  Business
No inflation as US booms
14 Jan 00 |  Business
Greenspan backs rate rises
07 Jan 00 |  Business
Big jump in US jobs
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